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NATIONAL  DEFENSE  PROGRAM 


HEARINGS 

BEFORE  A 

SPECIAL  COMMITTEE  INVESTIGATING  THE 

NATIONAL  DEFENSE  PEOGEAM 

UNITED  STATES  SENATE 

SEVENTY-EIGHTH  CONGEESS 

FIRST  AND  SECOND  SESSIONS 
PURSUANT  TO 

S,  Res.  6 

(78th  Congress) 

(Extending  S.  Res.  71 — 77th  Congress) 

A  RESOLUTION  AUTHORIZING  AND  DIRECTING 

AN  INVESTIGATION  OF  THE  NATIONAL 

DEFENSE  PROGRAM 


PART  21 


RAYON  VERSUS  COTTON  CORD  FOR  TIRES 


MANPOWER 


RECONVERSION  PROGRAM 


ARMY  HOTEL  ACQUISITION  PROGRAM 


SEPTEMBER  22,  OCTOBER  28,  NOVEMBER  19,  24 
DECEMBER  3  .1943;  AND  JANUARY  5,  7,  10,  1944 


Printed  for  the  use  of  the  Special  Committee  Investigating 
the  National  Defense  Program 


UNITED  STATES 
GOVERNMENT  PRINTING  OFFICE 
311932  WASHINGTON  :  1944 


n 


1i&s£ 


SPECIAL    COMMITTEE    TO    INVESTIGATE    THE    NATIONAL    DEFENSE 

PROGRAM 

HARRY  S.  TRUMAN,  Missouri,  Chairman 
TOM  CONNALLY,  Texas  OWEN  BREWSTER,  Maine 

JAMES  M.  MEAD,  New  York  HAROLD  H.  BURTON,  Ohio 

MON  C  WALLGREN,  Washington  JOSEPH  H.  BALL,  Minnesota 

CARL  A.  HATCH,  New  Mexico  HOMER  FERGUSON,  Michigan 

HARLEY  M.  KILGORE,  West  Virginia 

Hugh  Fulton,  Chief  Counsel 
Lydia  Lee,  Editor 
II 


CONTENTS 


Testimony  of —  Page 

Brown,  Harry  A.,  owner,  Arnold  Hotel,  Miami  Beach,  Fl  3-8834 

8836-8845,  8848-8852,  8854,  8857-8858 

Butler,   Marion  A.,  agent  for  owner,  Arnold  Hotel,    Miami  Beach, 

Fla_  _ 8833-8837,  8844-8852 " 

Cohen,  Meyer,  owner,  Tides  Hotel,  Miami  Beach,  Fla 8726-8730 

Duff,  John  M.,  Jr.,  operator  and  lessee,  Green  Heron  Hotel,  Miami 

Beach,  Fla 8762-8780 

Dunn,  George  M.,  president-manager,  Town  Talk  Bakery,  St.  Peters- 
burg, Fla 8721-8726 

DuPree,  Thomas  O'Hagan,  president,  Miami  Beach  Board  of  Real- 
tors-   _  _  8667-8685 

Evans,    Mrs.    Dorothy,    operator,    Patrician    Hotel,    Miami    Beach, 

Fla_  _ 8878-8885 

Frazure,  John  C.,  former  project  manager,  Miami  Beach  Real  Estate 

Project...- 8789,  8795-8798,  8800-8801,  8804-8805,  8824 

Gideon,  Lt.  Col.  David  B.,  Real  Estate  Division,  Office  of  Chief  of 

Engineers,  United  States  Army 8789 

Godson,  R.  W,  owner,  Oceanic  Villas  and  Surf  Edge  Apartment  Hotels, 

Miami  Beach,  Fla.  _ 8889-8897 

Goheen,  L.  D.,  co-owner,  Beverlv  Hotel,  St.  Petersburg,  Fla 8696-8697, 

8705-8709,  8714-8721 

Green,  William,  president,  American  Federation  of  Labor 8639-8655 

Haynes,  Henry  W.,  owner,  Princess  Issena  Hotel,  Daytona,  Beach, 

Fla 8685-8696 

Horobin,  Thomas  H.,  owner,  Park  View  Apartments,  Miami  Beach, 

Fla___- 8784 

Humpage,    Frederick    I.,    president,    Fidelity    Corporation,     Miami 

Beach,  Fla _ 8736,  8785-8788 

Jacobson,  James  A.,  special  assistant  to  Chairman,  War  Production 

Board 85 1 5-8527,  854 1 

Katz,  Samuel,  Plymouth  Hotel,  Miami  Beach,  Fla 8736 

Keefer,  E.  D.,  realtor  appraiser,  Miami  Beach,  Fla 8859-8874 

Keller,  K.  T.,  president,  Chrylser  Corporation 8592-8612 

Kelly,  Lt.  Col.  John  C,  headquarters,  Army  Air  Forces 8789,  8791, 

8800-8804,  8808-8809,  8815,  8817-8819,  8823-8825,  8827-8830 

Kirtley,  Fred  H.,  lawyer,  representing  Park  View  Apartments,  Miami 

Beach,  Fla 8780-8784 

Malone,  Frank,  radio  commentator,  Station  WQAM 8858-8859 

Mays,    Maj.    Arthur    R.,    Jr.,    Corps    of    Engineers,    United    States 

Army ._■ 8789,  8794-8795,  8818, 

8828,  8841,  8845-8847,  8852-8855,  8858,  8881,  8884-8885 

McNutt,  Paul  V.,  Director,  War  Manpower  Commission 8546-8572 

Mead,    D.    Richard,    co-owner,    Shoremede    Hotel,    Miami    Beach, 

Fla__ ' 8886-8889 

Morris,  J.  N.,  owner,  St.  Moritz  Hotel,  Miami  Beach,  Fla__ 8874-8878 

O'Brien,  Col.  John  J.,  Corps  of  Engineers,  United  States  Army_   8789-8801, 

8803-8831,  8855-8858,  8884-8885 

Rasco,  Glynn  Owen,  executive  manager,  Miami  Beach  Hotel  Owners 

Association 8670,  888 1 

Reed,  John  B.,  Miami,  Fla 8897-8898 

Spooner,    Morris  A.,  project  manager,    Miami  Beach   Real    Estate- 
Project 8789,  8793,  8828 

Stone,  Alfred,  operator,  Blackstone  Hotel,  Miami  Beach,  Fla__     8762-8763, 

8766-8768,  8773-8775,  8778-8779 

Upham,  Neil  W.,  vice  president,  St.  Petersburg  Hotelmen's  Associa- 
tion    8696-8705,  8709-8716,  8718-8721 

L  III 


IV  CONTENTS 

Testimony  of — 

Ward,  William  G.,  attorney  for  the  Miami  Beach  Hotel  Owners'  Asso-  Page 

ciation 8657-8667,  8762,  8889 

Weil,  Bruno,  Futch  &  Weil,  Realtors,  Miami  Beach,  Fla__.   8731-8762,  8777 
Whitney,  H.  LeRoy,  technical  consultant  to  Chairman,  War  Produc- 
tion Board 8515,  8521,  8528-8543 

Wilson,    Charles    E.,    Executive    Vice    Chairman,    War    Production 

Board 8573-8592 

Wilson,  Charles  E.,  president,  General  Motors  Corporation 8613-8638 

Tire  cord  production  program 8515 

Expansion  of  capacity  for  production  of  rayon  tire  cord 8519 

Defense  Plant  Corporation,  financing  of  rayon  cord  expansion  facilities 8523 

Results  of  tests  of  cotton  and  rayon  cord  tires 8528 

Determination  of  Dallas,  Tex.,  as  critical  labor  area  by  War  Manpower 

Commission 8546 

Lack  of  efficiency  in  utilization  of  manpower  by  North  American  Aviation, 

Inc 8549 

Problems  of  conversion  from  war  production 8576,  8588,  8596,  8620 

Cost-plus-fixed-fee  contracts 8581 

Incentive-wage  plan  for  war  production 8584 

Question  of  advance  notice  of  contract  termination 8586 

Production  record  of  Chrysler  Corporation 8592 

Production  record  of  General  Motors  Corporation 8614 

Post-war  petroleum  supplies 8617 

Labor's  program  for  conversion  from  war  production 8639 

Army  acquisition  of  hotels  in  Miami 8657,  8682 

Army  negotiations  for  leasing  Miami  hotels 8668,  8763 

Midtown  Hotel,  negotiations  for  lease  and  adjustment  on  release  by  Army_  8675 

Surf  and  Sand  Apartments,  acquisition  and  release  by  Army 8680 

Army  acquisition  of  hotels  in  Day tona  Beach 8685 

Princess  Issena  Hotel,  Day  tona  Beach,  Army  negotiations  for  lease 8687 

Princess  Issena  Hotel,  release  by  Army 8693 

Army  acquisition  of  hotels  in  St.  Petersburg 8696 

Royal  Palms  Hotel,  St.  Petersburg,  acquisition  and  release  by  Army 8701 

Beverly  Hotel,  St.  Petersburg,  release  by  Army 8706 

Acquisition  and  release  of  St.  Petersburg  hotels  by  Army 8709 

Beverly  Hotel,  St.  Petersburg,  acquisition  by  Army 8716 

Town  Talk  Bakery,  St.  Petersburg,  acquisition  by  Army 8721 

Tides  Hotel,  Miami  Beach,  acquisition  by  Army 8726 

Complaints  of  Miami  Beach  Hotel  Owners'  Association 8731,  8746 

Surfside  Hotel,  Miami  Beach,  acquisition  by  Army 8740 

Park  View  Apartments,  Miami  Beach,  acquisition  and  release  by  Army__  8780 

Fidelity  Corporation,  Army  negotiations  for  acquisition  of  four  hotels 8785 

Army  Real  Estate  Division  statement  re  negotiations  for  acquisition  of 

Florida  hotels 8789 

Arnold  Hotel,  Miami  Beach,  acquisition  and  release  by  Army 8833 

Factors  determining  appraisals  of  Miami  hotels 8859 

St.  Moritz  and  Jefferson  Hotels,  Miami  Beach,  acquisition  by  Army 8874 

Patrician  Hotel,  Miami  Beach,  acquisition  and  maintenance  by  Army 8878 

Shoremede  Hotel,  Miami  Beach,  acquisition  by  Army 8886 

Surf  Edge  Apartments  and  Oceanic  Villas,  Miami  Beach,  acquisition  by 

Army 8890 

Schedule  and  summary  of  exhibits v 

Wednesday,  September  22,  1943 8515 

Thursday,  October  28,  1943 8545 

Friday,  November  19,  1943 8573 

Wednesday,  November  24,  1943 8613 

Friday,  December  3,  1943 8639 

Wednesday,  January  5,  1944 8657 

Friday,  January  7,  1944 8731 

Monday,  January  10,  1944 8833 

Appendix 8899 

Index  ] I 

i  Name  and  company  only,  a  consolidated  subject-matter  index  will  appear  in  the  final  volume  of  these 
hearings. 


SCHEDULE  OF  EXHIBITS 


Number  and  summary  of  exhibits 


at  page 


904.  Letter,  dated  Sept.  14,  1943,  from  Donald  M.  Nelson,  Chair- 

man, War  Production  Board,  to  Senator  Harry  S.  Tru- 
man, submitting  report  prepared  by  War  Production 
Board,  at  suggestion  of  the  committee,  concerning  the  tire 
cord  situation 

905.  Telegram,  dated  Aug.  31,  1942,  from  a  tire  manufacturer,  to 

Frank  Walton,  Textile  Division,  War  Production  Board, 
re  superior  performance  of  cotton  cord  tires 

906.  Report,  dated  Sept.  23,  1943,  to  Donald  M.  Nelson,  Chair- 

man, War  Production  Board,  on  the  tire  cord  situation,  a 
qualitative  and  quantitative  analysis  by  H.  LeRoy 
Whitney,  technical  consultant  to  the  Chairman,  and 
James  A.  Jacobson,  special  assistant  to  the  Chairman 

907.  Telegram,  dated  July  16,  1943,  from  W.  E.  Shively,  chair- 

man, Ordnance  Advisory  Pneumatic  Tire  Committee,  to 
Chief  of  Ordnance,  Technical  Division,  stating  necessity 
for  use  of  rayon  in  synthetic  military  tires 

908.  Telegram,  dated  Oct.  27,   1943,  from  Charles  E.   Wilson, 

Executive  Vice  Chairman,  War  Production  Board,  to 
Paul  V.  McNutt,  War  Manpower  Commission,  re  reduc- 
tion in  manpower  requirements  of  North  American  Avia- 
tion, Inc 

909.  Telegram,  dated  Oct.   27,    1943,  from  Charles  E.  Wilson, 

Executive  Vice  Chairman,  War  Production  Board,  to 
Senator  Harry  S.  Truman,  re  reduction  in  manpower  re- 
quirements of  North  American  Aviation,  Inc 

910.  Item  from- Miami  Daily  News,  dated  Jan.  4,  1944,  re  estab- 

lishment of  officer  candidate  school  in  Miami  Beach 

911-  Documents  pertaining  to  conferences  of  Miami  Beach  Hotel 

916.  Owners  Association  committee  in  Washington  to  investi- 
gate rumors  of  Army  evacuation 

917.  Affidavit,  dated  Jan.  12,  1944,  of  Nellie  B.  Powney,  former 

secretary  to  Maj.  David  B.  Fitch  re  pressure  brought  to 
bear  on  hotel  owners  bv  Army 

918.  Affidavit,  dated  Jan.  12,"  1944,  of  Frances  E.  Marshall,  re 

pressure  brought  to  bear  on  hotel  owners  by  Army 

919.  Letter,  dated  Jan.  10,  1944,  from  Van  C.  Kussrow,  acting 

tax  assessor,  Dade  County,  Fla.,  to  Senators  Harley  M. 
Kilgore  and  Homer  Ferguson  re  tax  assessments  in  Dade 
County i 

920.  Letter,  dated  July  31,  1943,  from  Thomas  O'Hagan  Dupree, 

secretary  and  treasurer,  Park  West  Corporation,  to  Glynn 
O.  Rasco,  executive  manager,  Miami  Beach  Hotel  Own- 
ers Association,  re  Midtown  Hotel,  Miami  Beach,  Fla 

921.  Letter,  dated  July  2,  1943,  from  Thomas  O'Hagan  Dupree, 

secretary  and  treasurer,  Park  West  Corporation,  to  Glynn 
O.  Rasco,  executive  manager,  Miami  Beach  Hotel  Owners 
Association,  re  hotel  appraisals  on  an  annual  basis 

922.  Letter,  dated  July  3,  1943,  from  Thomas  O'Hagan  Dupree, 

secretary  and  treasurer,  Park  West  Corporation,  to  Glynn 
O.  Rasco,  executive  manager,  Miami  Beach  Hotel  Own- 
ers Association,  re  cubic  feet  of  space  per  man  housed 


8516 
8538 

8542 

8542 


8899 


8900- 
8937 


8937 


8553 

8553- 
8554 

8555 

8555 

8658 

8658 

8659 

8938- 
8945 

8671 

8945 

8671 

8946 

8671 


8675 


8679 


8679 


8947 


8948 


8948 


VI 


SCHEDULE    OF   EXHIBITS 


Number  and  summary  of  exhibits 


Intro- 
duced 
at  page 


Appears 
on  page 


923.  Operating    statements,    Princess    Issena    Hotel,    Daytona 

Beach,  Fla.,  1938-42 

924.  Letter,  dated  Nov.  5,  1943,  from  Otho  Fowler,  secretary, 

St.  Petersburg  Hotel  Men's  Association,  to  Senator 
Harry  S.  Truman,  submitting  resolution  adopted  by  the 
association  re  Army  leasing  of  hotels i 

925.  Editorial,  dated  Nov.  25,  1943,  St  Petersburg  Evening  In- 

dependent, re  Army  hotel  rentals 

926.  Affidavit,  dated  July  26,  1943,  of  William  W.  Upham,  re 

Royal  Palm  Hotel,  St  Petersburg,  Fla 

927.  Affidavits,  dated  Jan.  12,  1944,  of  George  M.  Nicholson,  re 

Seneca  Hotel,  St  Petersburg,  Fla 

928.  Affidavit,  dated  Jan.  7,  1944,  of  Neil  W.  Upham,  re  Royal 

Palm  Hotel,  St.  Petersburg,  Fla 

929.  Affidavit,  dated  Jan.  14,  1944,  of  Florence  Lowe,  re  Poin- 

settia  Hotel,  St.  Petersburg,  Fla 

930.  Letter,    dated   Feb.    4,    1944,   from   Neil   W.    Upham,    to 

Rudolph  Halley,  executive  assistant  to  the  chief  counsel 
to  the  committee,  re  settlement  and  cost  figures  for  St. 
Petersburg,  Fla.,  hotels 

931.  Documents  submitted  by  L.  D.  Goheen,  re  the  Beverly 

Hotel,  St.  Petersburg,  Fla 

932.  Affidavit,   dated  Jan.  4,   1944,  of  Elmore  W.  Allison,   re 

Allison  Hotel,  St.  Petersburg,  Fla 

933.  Affidavit,  dated  Jan.  14,  1944,  of  G.  Ray  Walker,  re  Stanton 

Hotel,  St.  Petersburg,  Fla 

934.  Affidavit,  dated  Jan.  3,  1944,  of  Auldon  B.  Dugan,  re  Dusen- 

bury  Hotel,  St.  Petersburg,  Fla 

935.  Letter,  dated  Dec.  22,   1943,  from  Neil  W.  Upham,  vice 

president,  St.  Petersburg  Hotelmen's  Association,  to 
Rudolph  Halley,  executive  assistant  to  the  chief  counsel 
to  the  committee,  requesting  the  committee  to  hold  hear- 
ings in  St.  Petersburg,  Fla 

936.  Letter,  dated  Jan.  15,  1944,  from  Neil  W.  Upham,  to  the 

committee  expressing  appreciation  for  hearings  held  at 
Miami  Beach,  Fla 

937.  Letter,  dated  Jan.   24,   1944,  from  Howard  C.   Petersen, 

executive  assistant  to  Robert  P.  Patterson,  Undersecre- 
tary of  War,  to  Otho  Fowler,  secretary,  St.  Petersburg 
Hotel  Mens'  Association,  concerning  a  proposed  investi- 
gation of  the  acquisition  and  release  of  hotels  by  the 
Army 

938.  Letter,  dated  Feb.  4,  1944,  from  Otho  Fowler,  secretary,  St. 

Petersburg  Hotelmen's  Association,  to  Robert  P.  Patter- 
son, Under  Secretary  of  War,  re  acquisition  and  release  of 
hotels  by  the  Army 

939.  Affidavit,  dated  Jan.  14,  1944,  of  Ben  Doyle,  re  Southmoor 

Apartments,  St.  Petersburg,  Fla 

940.  Statement  of  income  and  expenses,  July  1,  1940,  to  June  30, 

1941,  of  Pennsylvania  Hotel,  St.  Petersburg,  Fla 

941.  Statement   of   conditions    derived   from   lease   of    Merhige 

Building  and  Orange  Blossom  Cafeteria,  St.  Petersburg, 
Fla 

942.  Affidavit,  dated  Feb.  4,  1944,  of  E.  W.  Hockenbury,  re  Al- 

bermarle  Hotel,  Jr.,  and  Albermarle  Hotel,  Sr.,  St.  Peters- 
burg, Fla 

943.  Affidavit,  dated  Jan.  10,  1944,  of  W.  L.  Carmack,  re  Car- 

mack  Apartments,  St.  Petersburg,  Fla 

944.  Documents  relating  to  acquisition  and  release  of  Ei  Cortez 

Manor,  Daytona  Beach,  Fla 


8690 


8949 


8698 

8951 

8699 

8953 

8701 

8954 

8701 

8959 

8702 

8961 

8705 

8962 

8705 

8963 

8706 

8964- 
8985 

8711 

8985 

8711 

8986 

8712 

8987 

8714 
8714 

8714 

8714 
8720 
8720 

8721 

8721 
8721 
8721 


8991 
8991 

8992 

8993 
8993 
8994 

8996 

8997 
8998 
8998 


SCHEDULE   OF  EXHIBITS 


VII 


Number  and  summary  of  exhibits 


Appears 
on  page 


945.  Affidavit,  dated  Dec.  31,  1943,  of  L.  H.  Miller,  re  cost  of 

reconditioning  El  Tovar  Hotel,  St.  Petersburg,  after  re- 
lease by  Army 

946.  Letter,  dated  Jan.  6,  1944,  from  Elmer  Ermatinger,  to  the 

committee  re  acquisition  and  release  of  his  store  building, 
St.  Petersburg,  by  Army 

947.  Affidavit,  dated  July  27,  1943,  of  Florence  A.  Robinson,  re 

Floronton  Hotel,  St.  Petersburg 

948.  Affidavits,  dated  July  21,  1943,  and  Jan.  3,  1944,  of  W.  W. 

Gav  and  Mabel  E.  Gay,  re  Gayfair  Hotel,  St.  Petersburg, 
Fla 

949.  Affidavit,  dated  Jan.  4,  1944,  of  Evelyn  B.  Rittenhouse,  re 

Hibiscus  Hotel,  St.  Petersburg,  Fla : 

950.  Letter,  dated  Jan.  4,  1944,  from  Otho  Fowler  to  Neil  Upham, 

re  Hollander  Hotel,  St  Petersburg 

951.  Affidavit,   dated  Jan.   3,    1944,   of   Mr.  and   Mrs.    C.   W. 

Ferguson,  re  the  New  Edgewater  Inn,  St.  Petersburg,  Fla. 

952.  Statement  of  Harvey  Pheil,  re  Pheil  Hotel,  St.  Petersburg, 

Fla 

953.  Affidavit,  dated  Feb.   4,    1944,   of  Chester  Vannatter  re 

Prather  Hotel,  St.  Petersburg,  Fla 

954.  Affidavit,  dated  Jan.  3,  1944,  of  Mrs.  John  H.  Proctor,  re 

Proctor  Hotel,  St.  Petersburg,  Fla 

955.  Affidavit,  dated  Jan.  3,  1944,  of  Fannie  L.  Ten  Eyck  re 

Morgan  Ten  Eyck  Hotel,  St.  Petersburg 

956.  Affidavit,  dated  Jan.  3,   1944,  of  Gust  Blair,  re  Wigwam 

Hotel,  St.  Petersburg 

957.  Affidavit,  dated  Jan.  7,  1944,  of  A.  B.  Carter,  re  Williams 

Apartment  Hotel,  St.  Petersburg 

958.  Affidavit  and  correspondence  of  George  M.  Dunn,  re  ac- 
■.              quisition  and  release  of  Town  Talk  Bakery,  St.  Peters- 
burg, by  Army 

959.  Affidavit,   dated  Jan.   4,    1944,   of  Herbert  D.    Grant,  re 

acquisition  and  release  of  Empire  Building,  St.  Peters- 
burg, by  Army 

960.  Affidavit,  dated  Jan.  4,   1944,  of  Meyer  Cohen,  re  Tides 

Hotel,  Miami  Beach 

961.  List  of  Miami  Beach  hotel  owners  who  signed  leases  with 

the  Armv  after  Mar.  24,  1942 

962.  Article  from  Miami  Daily  News,  Mar.  23,  1942,  re  Army 

negotiations  for  leasing  hotels . 

963.  Letter,  dated  July  21,  1943,  from  Alfred  Stone,  president, 

Blackstone  Hotel  and  Cabana  Club,  to  Miami  Beach 
Hotel  Owners'  Association,  re  appointment  of  an  impar- 
tial committee  to  judge  damages  caused  by  Army's  use 
of  hotels 

964.  Letter,  dated  Nov.  16,  1943,  from  John  M.  Duff,  Jr.,  to 

Senator  Harry  S.  Truman,  offering  assistance  to  the 
committee  in  its  investigation  of  acquisition  of  Miami 

Beach  hotels  by  Army 

965.'  Letter,  dated  Jan.  7,  1944,  from  Bruno  Weil  to  the  com- 
mittee re  the  testimony  of  John  M.  Duff,  Jr.,  before  the 
committee 

966.  Letter,  dated  Apr.   15,   1942,  from  Committee  of  Civilian 

Appraisers,  Miami  Beach,  to  Maj.  David  G.  Fitch,  U.  S. 
Engineers  Corps,  re  that  committee's  cooperation  with 
hotel  owners,  and  Army 

967.  Editorial  from  Miami  Beach  Daily  Tropics,  Mar.  23,  1942, 

alleging  "gouging"  of  Army  by  a  few  hotel  owners 

968.  Letter,  dated  Aug.  5,  1943,  from  Fred  H.  Kirtley,  represent- 

ing Park  View  Apartments,  Miami  Beach,  to  John  C. 
Frazure,  real  estate  project  office,  re  repairs  and  replace- 
ments  


8721 


9000 


8721 

9001 

8721 

9002 

8721 

9003 

8721 

9005 

8721 

9006 

8721 

9006 

8721 

9008 

8721 

9012 

8721 

9013 

8721 

9013 

8721 

9014 

8721 

9015 

8721 

8726 
8727 
8736 
8760 

8762 

8762 
8762 

8776 
8779 

8782 


9015 

9019 
9020 
9021 
9022 

9024 

9024 
9025 


8775- 
8776 

9026 


8782 


VIII 


SCHEDULE   OF  EXHIBITS 


Number  and  summary  of  exhibits 


969.   Clippings  from  Miami  newspapers  March,  1942,  re  early- 
negotiations  by  Army  for  hotels 


970. 


Letter,  dated  Feb.  22,  1944,  from  Capt.  John  A.  Kennedy, 
U.  S.  Naval  Reserve,  to  Hugh  Fulton,  chief  counsel  to  the 
committee,  concerning  personnel  in  Real  Estate  Division, 
Bureau  of  Yards  and  Docks,  Navy  Department 

Manual  of  instructions  concerning  leases  of  real  estate  for 
the  use  of  the  Navy  Department,  with  information  con- 
cerning the  use  of  revocable  permits 

972.  Transcripts  of  meetings  of  hotel  owners  and  Army  repre- 
sentatives Feb.  14,  15,  and  18,  1942 


971. 


973.  Clippings  from  Miami  newspapers  concerning  Army  acqui- 

sition and  release  of  hotels 

974.  Clippings  from  Miami  newspapers  concerning  Army  acqui- 

sition and  release  of  hotels 

975.  Clippings  from  Miami  newspapers  concerning  Army  acquisi- 

tion and  release  of  hotels 

976.  Clippings  from  Miami  newspapers  concerning  Army  acquisi- 

tion and  release  of  hotels 

977.  Telegram  dated  Apr.  4,  1942,  from  hotel  owners  of  North 

Beach,  Miami,  Fla.,  to  Hon.  Franklin  D.  Roosevelt,  pro- 
testing Army  procedure  in  acquiring  hotels 

978.  Letter,  dated  Apr.  21,  1942,  from  D.  Richard  Mead,  repre- 

senting Shoremede  Hotel  to  Brig.  Gen.  Ralph  H.  Wooten 
condemning  North  Beach  hotel  owners  telegram  to  the 
President;  letter,  dated  Apr.  23,  1942,  from  Walter  Jacobs, 
representing  Lord  Tarleton  Hotel,  to  General  Wooten, 
denying  knowledge  of  telegram  to  the  President;  and 
letter,  dated  Apr.  28,  1942,  from  Miami  Beach  Hotel  Asso- 
ciation to  the  President,  opposing  sentiments  of  the  tele- 
gram   

979.  Resolution  No.  5464  by  the  city  council  of  the  city  of  Miami 

Beach,  Fla.,  to  cooperate  with  U.  S.  Government  by  clos- 
ing certain  streets  to  traffic 

980.  Letter,  dated  Apr.   15,  1942,  from  Committee  of  Civilian 

Appraisers,  Miami  Beach,  to  Maj.  David  G.  Fitch,  re 
that  committee's  cooperation  with  hotel  owners  and  Army. 

981.  Memorandum,    dated   June   23,    1942,   from   Norman   M. 

Littell,  Assistant  Attorney  General,  Lands  Division,  De- 
partment of  Justice  to  United  States  attorneys,  field  at- 
torneys of  the  Lands  Division  and  land-acquiring  agencies 
of  the  Government;  re  appraisals  in  condemnation  pro- 
ceedings   

982.  Memorandum,    dated    Mar.    31,    1942,   from   Norman    M. 

Littell,  Assistant  Attorney  General,  Lands  Division,  De- 
partment of  Justice,  to  United  States  attorneys  and  field 
attorneys  of  the  Lands  Division,  of  instructions  re  acqui- 
sitions under  War  Purposes  Act  as  supplemented  by 
title  II,  Second  War  Powers  Act  of  Mar.  27,  1942  (includ- 
ing copy  of  Second  War  Powers  Act) 

983.  War  Department,  Real  Estate  Manual,  Ch.  IV,  Appraisals, 

sec.  1,  General  Policy 

984.  Copy  of  advertisement  appearing  in  Miami  Tropics,  Jan.  2, 

1944,  offering  certain  hotels,  apartment  buildings,  and 
commercial  buildings  for  sale 

985.  Letter,  dated  Feb.  21,  1944,  from  Lt.  Col.  Miles  H.  Knowles, 

Judge  Advocate  General's  Division,  to  Hugh  Fulton,  sub- 
mitting information  requested  by  the  committee 

986.  Total  rentals  paid  by  Army  for  all  leased  facilities  at  Miami 

Beach,  Fla.,  through  Jan.  31,  1944 


8799 


8803 


8803 

9033 

8804 

9053- 
9058 

8805 

9058 

8805 

9073 

8805 

9076 

8805 

9082 

8809 


8810 
8810 
8812 

8812 


8812 
8812 

8814 

8815 
8815 


9028- 
9033 


9033 


9089 


9090 
9091 
9091 

9092 


9100 
9112 

9113 

9114 
9115 


SCHEDULE    OF   EXHIBITS 


IX 


Number  and  summary  of  exhibits 


Intro 
duced 
at  page 


Appears 
on  page 


987. 


988. 


989. 

990. 
991. 

992. 

993. 

994. 
995. 
996. 
997. 
998. 

999. 


1000. 
1001. 
1002. 

1003. 


1004. 
1005. 

1006. 
1007. 


Lists  of  Miami  Beach,  Fla.,  leased  hotels  retained  and  in- 
activated by  Army  Air  Forces 


Lists  of  Atlantic  City,  St.  Petersburg,  and  Daytona  Beach 
leased  hotels  inactivated  by  Army  Air  Force,  total  list  of 
Miami  Beach  leased  hotels,  both  retained  and  inactivated, 
and  lists  of  miscellaneous  leased  hotels,  retained  and  in- 
activated  


1008- 
1083. 


Comptroller  General's  decisions  regarding  items  which  may 
not  be  considered  recompensable  in  connection  with  Gov- 
ernment leases  of  private  properties 

List  of  personnel  employed  at  Miami  Beach  real  estate  pro- 
ject office 

Letter,  dated  July  31,  1943,  from  Marion  Butler,  to  Miami 
Beach  Hotel  Owners'  Association,  concerning  release  of 
Arnold  Hotel 

Letter,  dated  Jan.  14,  1944,  from  Marion  Butler  to  Senator 
Harley  Kilgore  enclosing  copy  of  protest  filed  with  condi- 
tion report  on  Arnold  Hotel 

Letter,  dated  Aug.  26,  1942,  from  Lt.  Joel  A.  Clark,  Corps  of 
Engineers,  to  J.  M.  Rose,  notifying  him  that  his  payments 
of  rental  on  Royal  Palm  Hotel  would  be  made  until  inven- 
tories and  condition  reports  were  returned  to  Army 

List  of  qualifications  of  E.  D.  Keefer,  Miami  Beach,  Fla., 
realtor-appraiser _ 

Furniture  valuations  by  the  civilian  committee,  Miami 
Beach,  for  partial  list  of  hotels  leased 

Letter,  dated  May  15,  1943,  from  E.  D.  Keefer,  to  "whom  it 
may  concern",  re  his' estimates  of  Miami  Beach  hotels 

List  of  17  Miami  Beach  hotels  showing  commercial  rent, 
Army  rent,  and  civilian  committee  rent  recommendations. 

List  of  Miami  Beach  hotels  sold  and  leased  since  Pearl 
Harbor — percentage  of  post-Pearl  Harbor  rentals  to  post- 
Pearl  Harbor  sales  price 

Hotels  sold  since  Pearl  Harbor,  leased  before  Pearl  Har- 
bor— percentage  of  pre-Pearl  Harbor  leases  to  post- 
Pearl  Harbor  sales  prices 

Sales  of  real  estate  at  Miami  Beach,  1938-43 

List  of  66  Miami  Beach  hotels  sold  since  Pearl  Harbor 

Letter,  dated  July  13,  1943,  from  J.  N.  Morris,  to  Glynn  O. 
Rasco,  re  Jefferson  Hotel,  Miami  Beach,  Fla 

Letter,  dated  Mar.  23,  1942,  from  J.  N.  Morris  to  Senator 
Claude  Pepper,  re  negotiations  for  Jefferson  Hotel,  Miami 
Beach,  enclosing  option  agreement 

Letter,  dated  July  15,  1943,  from  J.  M.  Apple,  to  Glynn  O. 
Rasco,  re  Patrician  Hotel,  Miami  Beach,  Fla 

Letter,  dated  July  29,  1943,  from  Mrs.  Dorothy  Evans,  to 
L.  B.  Southerland,  real  estate  project  office,  concerning 
removal  of  certain  furniture  from  Patrician  Hotel,  Miami 
Beach,  Fla 

Excerpt  from  U.  S.  Army  file  on  Patrician  Hotel,  Miami 
Beach,  regarding  exterior  maintenance 

Letter,  dated  Dec.  15,  1943,  from  D.  Richard  Mead,  to 
Representative  Pat  Cannon,  enclosing  letter,  dated 
Nov.  27,  1943,  from  Mr.  Mead  to  Col.  John  J.  O'Brien, 
Engineers  Corps,  concerning  renegotiation  of  leases  for 
the  Shoremede  and  Dayton  Apartment  Hotel,  Miami 
Beach,  Fla 


Data  pertaining  to  the  acquisition  and  release  of  miscel- 
laneous Miami  Beach,  Fla.,  hotels — for  specific  references 
see  index  to  this  volume 


8816 


9115- 
9117 


8816 

9119- 
9127 

8820 

9127 

8824 

9128 

8837 

9129 

8838 

9130 

8859 
8861 
8866 


8872 


8872 
8872 
8874 

8874 


8876 
8878 

8883 


8889 


9131 
9132 
9132 
9133 

9133 


9134 
9134 
9135 

9139 


9139 
9140 

8883 
9141 


9142 


9144- 
9285 


INVESTIGATION  OF  NATIONAL  DEFENSE  PEOGEAM 


WEDNESDAY,   SEPTEMBER   22,    1943 

United  States  Senate, 
Special  Committee  Investigating 

The  National  Defense  Program, 

Washington,  D.  C. 
The  committee  met  at  10:40  a.  m.,  pursuant  to  the  call  of  the  chair- 
man, in  room  317,  Senate  Office  Building,  Washington,  D.  C,  Senator 
Harry  S.  Truman,  presiding. 

Present:  Senators  Harry  S.  Truman  (chairman),  Tom  Connally, 
Homer  Ferguson. 

Present  also:  Senators  John  H.  Bankhead,  Alabama;  Burnet  R. 
Maybank,  South  Carolina;  E.  H.  Moore,  Oklahoma;  Tom  Stewart, 
Tennessee;  Hugh  Fulton,  Chief  Counsel  to  the  committee;  and  Ru- 
dolph Halley,  assistant  counsel. 

The  Chairman.  The  committee  will  come  to  order. 
Mr.  Whitney,  will  you  please  take  the  witness  stand?     You  and 
Mr.  Jacobson,  I  believe,  are  the  ones  we  want  to  hear  from  this 
morning. 

TESTIMONY  OF  H.  LeROY  WHITNEY,  TECHNICAL  CONSULTANT  TO 
THE  CHAIRMAN  OF  THE  WAR  PRODUCTION  BOARD,  AND  JAMES 
A.  JACOBSON,  SPECIAL  ASSISTANT  TO  THE  CHAIRMAN  OF  THE 
WAR  PRODUCTION  BOARD 

TIRE  CORD  PRODUCTION  PROGRAM 

The  Chairman.  Mr.  Whitney,  you  had  a  statement  you  wanted 
to  make  to  this  committee  on  certain  tests  which  were  requested  by 
the  committee  for  cord  for  tires,  I  believe. 

Mr.  Whitney.  Yes,  Mr.  Senator,  but  I  think  it  would  be  better  if 
Mr.  Jacobson,  who  worked  out  the  requirements  end,  gave  his  data 
to  you  first.  I  think  it  will  make  the  picture  as  to  what  we  have  to 
accomplish  a  little  clearer.  I  would  like  to  have  Mr.  Jacobson  do 
that. 

The  Chairman.  Very  well,'  Mr.  Jacobson,  proceed. 

Mr.  Jacobson.  I  would  like  just  to  go  back  a  moment  to  the  incep- 
tion of  our  assignment  on  this  high  tenacity  rayon  cord  and  the 
entire  tire-cord  problem.  About  August  15  Mr.  Nelson  called  Mr. 
Whitney  and  me  into  his  office  and  asked  us  if  we  would  undertake  a 
full  and  complete  check  of  the  whole  tire-cord  program,  particu- 
larly the  rayon  and  cotton  cord  aspect  of  it,  and  report  promptly  to 
him.    His  purpose  in  doing  that  was  to  carry  out  the  instructions  or 

8515 


8516     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

the  suggestions  your  committee  had  given,  and  to  report  fully  to  you 
people  after  we  had  completed  what  we  hoped  would  be  a  thorough 
investigation  of  this. 

Our  check  started  on  about  August  15,  and  by  September  13  we  had 
completed  our  preliminary  report  to  him.  I  believe  he  has  furnished 
your  committee  with  a  copy  of  that  report,1  and  in  doing  so,  he  has  sent 
a  letter  which  I  would  like  to  read  into  the  record,  if  I  may. 

The  Chairman.  Proceed. 

Mr.  Jacobson.  It  is  dated  September  16  and  addressed,  "My  dear 
Senator  Truman" : 

In  July  your  committee  published  a  report  on  the  comparative  merits  of  rayon 
and  cotton  tire  cord.  In  conformity  with  the  suggestions  made  in  that  report 
and  in  later  conversations  between  the  committee  and  members  of  my  staff:,  I 
assigned  Mr.  H.  LeRoy  Whitney,  my  technical  consultant,  and  Mr.  James  A.  Ja- 
cobson,  my  Special  Assistant  on  Industrial  Analysis,  to  make  a  thorough  study  and 
appraisal  of  the  whole  question  and  to  present  their  findings  and  conclusions  to 
me  at  the  earliest  practicable  moment  for  subsequent  submission  to  you.  I  par- 
ticularly emphasized  to  them  my  conviction  that  your  committee  was  just  as  in- 
terested as  the  War  Production  Board  in  obtaining  a  complete,  impartial,  and 
wholly  up-to-date  report  on  all  phases  of  this  question,  irrespective  of  whether 
it  justified  a  use  of  rayon  or  cotton  greater  or  lesser  than  presently  contemplated. 

Messrs.  Whitney  and  Jacobson  have  spared  no  effort  to  this  end.  They  have 
gathered  together  not  merely  evidence  already  available  in  existing  reports  and 
studies,  but  also  such  other  factual  material  as  they  could  develop  through  further 
independent  research  and  compilations  of  laboratory  and  field  test  data. 

The  new  material  has  had  a  significant  bearing  on  their  conclusions. 

And  I  believe  you  will  see  that  the  new  material  is  quite  different 
from  some  of  the  material  that  existed  some  time  ago. 

The  report  prepared  by  Messrs.  Whitney  and  Jacobson  is  attached  hereto.  It 
has  my  approval.  It  will  I  hope,  provide  the  members  of  your  committee  with 
the  full  factual  information  which  they  have  been  seeking  on  this  difficult  tech- 
nical supply  problem. 

On  the  basis  of  the  findings  of  Messrs.  Whitney  and  Jacobson,  I  believe  that 
one  broad  conclusion  is  inescapable,  namely,  that  our  problem  from  now  on  is  not 
one  of  deciding  whether  to  use  rayon  or  cotton,  but  rather  being  able  to  provide 
a  sufficient  quantity  of  both  rayon  and  cotton. 

We  must  have  sufficient  rayon  for  aircraft  tires  and  fuel  cells,  for  combat  tires 
for  Army  vehicles,  and  for  heavy-duty  tires  for  the  military  and  intercity  truck 
and  bus  fleets.  We  must  have  sufficient  cotton  for  the  tires  on  the  jeeps  and 
other  military  equipment,  for  farm  trucks  and  tractors,  and  for  many  other 
highly  essential  purposes,  as  well  as  for  the  millions  of  passenger  cars  and 
small  trucks  that  enables  us  to  attain  our  war  production  goals. 

Our  1944  rubber  program  threatens  to  be  seriously  retarded  by  inadequate  sup- 
plies of  both  kinds  of  fiber,  and  I  believe  that  only  by  the  most  vigorous  efforts  will 
we  be  able  to  supply  the  enormous  quantities  necessary  for  the  successful  prose- 
cution of  the  war.  We  in  the  War  Production  Board  are  doing  all  we  can  to  aid 
this  important  part  of  our  war  effort,  and  I  know  we  can,  as  always,  count  upon 
both  labor  and  management  to  do  their  full  part.  They  realize,  as  do  we,  that  our 
military  programs  and  essential  civilian  activities  require  tremendous  numbers 
of  tires,  and  that  this  means  vast  quantities  of. tire  cord.  With  all  of  us  striving 
hard  for  more  tire  cord  production,  both  cotton  and  rayon,  we  will  solve  this 
problem,  as  we  have  many  others  that  have  arisen  since  this  war  started. 

( The  letter  referred  to  was  marked  "Exhibit  No.  904"  and  is  included 
in  the  appendix  on  p.  8899.) 

Mr.  Halley.  Mr.  Jacobson,  it  is  noted  that  the  report  itself  is 
labeled  "secret." 

Mr.  Jacobson.  Yes,  it  is. 


See  Exhibit  No.  906,  appendix,  pp.  8900-8937. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8517 

Mr.  Halley.  Would  you  state  whether  that  is  because  the  con- 
tents of  the  report  are  facts  of  such  a  nature  that  they  must  be  kept 
a  secret? 

Mr.  Jacobson.  There  are  facts  in  there  of  a  highly  secret  nature 
relating  to  the  military  programs,  that  cannot  be  made  public. 

Mr.  Halley.  And  for  that  reason,  it  is  requested  that  the  report 
be  kept  secret  ? 

Mr.  Jacobson.  It  is. 

I  would  like  to  outline  briefly  the  problem  that  we  have  seen 
in  this  tire-cord  program.  Earlier  this  year,  about  April,  the  Rub- 
ber Director  drew  up  a  program  which  envisaged  the  production  of 
about  52,000,000  tires  in  1944.  That  program  included  some  14,600,000 
tires  to  be  made  of  rayon  cord  and  over  37,000,000  tires  to  be  made  of 
cotton  cord.  The  requirements  for  that  entire  program  envisaged  the 
use  of  about  206,000,000  pounds  of  rayon  cord  in  1944  and  over 
210,000,000  pounds  of  cotton  cord  in  that  year. 

These  requirements  aggregated  some  417,000,000  pounds  and  they 
were  a  great  deal  larger  than  any  requirements  that  we  had  been 
called  upon  to  fill  in  any  pre-war  period.  In  1941,  for  instance, 
which  was  a  peak  year  in  tire  output,  certainly  in  recent  history,  we 
produced  around  61,000,000  tires.  We  used  up  somewhere  in  the 
neighborhood  of  335,000,000  pounds  of  both  types  of  cord  in  that  year. 
When  Mr.  Whitney  and  I  saw  the  new  requirements,  our  first  re- 
action was  that  they  were  certainly  substantial  requests.  That  in  it- 
self, the  mere  figure  itself,  caused  us  to  make  as  complete  and  thorough 
an  investigation  of  that  as  possible. 

Then  the  second  thing  was  the  question  of  whether  we  should  use 
rayon  or  cotton.  Mr.  Whitney  has  undertaken  to  go  particularly 
into  that  aspect  of  this  problem.  I  have  concentrated  more  on  finding 
out  what  our  production  would  be  in  1944,  and  what  the  requirements 
actually  would  be  on  a  rock-bottom  basis. 

I  would  like  just  to  comment  briefly  on  the  part  of  this  work  that 
I  have  been  most  closely  connected  with.  On  production,  we  found 
that  the  facilities  that  had  been  approved  by  the  date  on  which  we 
got  into  this  investigation,  namely,  August  15,  would  have  a  ca- 
pacity— this  is  rayon  cord — at  the  end  of  1944  of  approximately 
162,000,000  pounds.  That  is  an  annual  capacity,  and  it  is  quite  easy 
to  confuse  annual  capacity  with  actual  production  in  a  year.  We 
therefore  went  back  and  asked  each  one  of  these  companies,  and  we 
asked  our  Textile  Division  to  check  it  most  closely,  to  find  out  how 
much  rayon  tire  cord  they  could  actually  produce  in  1944  out  of 
those  existing  and  approved  facilities.  They  came  back  with  the 
answer  that  it  would  be  about  112,000,000  pounds ;  not  the  162,000,000 
capacity  but  about  112,000,000  pounds. 

The  reason  for  that  drop  or  the  discrepancy  or  the  difference  there 
arises  out  of  this  simple  fact  which  we  at  first  sort  of  overlooked, 
namely,  that  you  can't  convert  a  plant,  or  you  can't  build  a  new 
plant  overnight.  These,  like  the  100-octane  plants,  take  a  consider- 
able number  of  months  to  build.  Eight  months  is  the  earliest  that 
you  can  bring  a  conversion  in.  Nine  to  twelve  months  is  about  the 
period  involved  in  bringing  in  a  major  expansion. 

We  had,  therefore,  to  summarize  briefly,  about  112.000,000  pounds 
of  rayon  cord  in  sight  for  next  year  against  the  Rubber  Director's  re- 


8518     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

quirement  of  206,000,000  pounds — in  other  words,  a  very  substantial 
deficit.  We  then  attempted  to  make  a  check  of  these  requirements  to 
find  out  how  sound  they  actually  were.  In  order  to  do  so,  we  first 
contacted  the  Rubber  Director's  office  and  obtained  from  him  his  sched- 
ule as  to  the  types  of  tires  and  the  number  of  tires  that  he  expected 
would  be  produced  in  1944.  We  went  into  that.  We  took  that  schedule 
and  went  to  each  of  the  claimant  agencies  and  attempted  to  have  them, 
or  we  asked  them  to  substantiate,  if  they  could,  their  requirements  that 
the  Rubber  Director  had  presented.  I  won't  bother  you  with  the  de- 
tails, but  we  have  checked  even  down  to  the  last  detail  that  we  could  on 
that,  and  we  believe  that  the  Rubber  Director's  requirement  was  fully 
substantiated,  both  in  terms  of  the  total  quantity  of  tire  cord  and  in 
terms  of  the  amount  of  rayon. 

Mr.  Halley.  Mr.  Jacobson,  would  you  state  the  particular  types  of 
tires  which  the  Rubber  Director  intended  should  have  rayon  cord 
when  he  submitted  his  requirement  figure  of  206,000,000  pounds  ? 

Mr.  Jacobson.  I  will  be  glad  to.  It  included,  first,  airplane  tires ; 
second,  combat  tires;  third,  it  included  military  and  civilian  truck  and 
bus  tires  of  sizes  7.00-20  10-ply  and  above.  Included  in  that  206,- 
000,000-pound  figure  were  approximately  42,000,000  pounds  of  rayon 
tire  cord  for  tires  which  the  military  had  said  would  be  adequate  if  pro- 
duced of  cotton  cord  construction.  We  therefore  deducted  that  from 
the  206,000,000.    That  left  us  a  net  figure  of  about  164,000,000. 

Mr.  Halley.  To  what  type  of  tire  do  you  refer  ? 

Mr.  Jacobson.  I  refer  to  the  7.50-20  8-ply  if  in  rayon  and  the  9.00- 
16  8-ply  if  in  rayon.  If  it  were  to  be  of  cotton  construction,  it  would 
be  either  8-ply  plus  2  cap  plies,  or  10-ply  cotton,  depending  upon  the 
amount  of  GRS  or  synthetic  rubber  that  would  go  into  the  tire. 

Mr.  Halley.  And  in  computing  your  requirement,  you  assume  that 
that  type  of  tire  would  be  made  with  cotton  cord  ? 

Mr.  Jacobson.  We  have  had  to  assume  that,  because  we  have 
112,000,000  pounds  out  of  those  existing  facilities.  We  had  112,000,000 
pounds  out  of  those  existing  facilities  at  that  time  and  we  had  a  total 
requirement  of  164,000,000  net  after  deducting  the  42,000,000  pounds. 

Mr.  Halley.  And  you  were  advised  that  such  tires  could  be  made 
adequately  with  cotton  cord ;  is  that  correct  \ 

Mr.  Jacobson.  That  is  right ;  yes,  sir. 

We  have  tried  to  go  back  beyond  just  the  mere  pounds  of  tire  cord  in- 
volved in  this  thing.  We  tried  to  go  back  to  the  basic  military  and 
civilian  programs  that  are  here  involved.  I  don't  believe  you  are  in- 
terested in  the  details  of  this,  but  the  broad  concept  and  the  broad 
principles  involved  may  be  of  some  interest.  We  have  under  way, 
and  we  have  had  under  way  for  some  time,  a  tremendous  military 
truck  program.  We  have  not  had  under  way  any  important  civilian 
truck  program,  but  the  5,000,000  trucks  that  there  are  in  this  country 
have  been  doing  without  an  appreciable  number  of  new  tires  for  some 
time.  We  can  expect  the  load  that  our  domestic  transportation  sys- 
tems will  have  to  carry  to  be  substantially  increased  as  this  war  goes 
along.  The  trend  in  the  figures  is  really  startling.  The  military,  of 
course,  is  faced  with  the  problem  of  not  only  taking  care  of  the  mil- 
itary fronts,  but  also  of  taking  care  of  some  of  the  civilian  fronts  as 
we  move  forward. 

The  lengthening  military  supply  lines  will  throw  ever-increasing 
burdens  on  tire-borne  transport  facilities  as,  for  instance,  the  Russians 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8519 

are  now  about  1,000  miles  farther  west  than  they  were  at  Stalingrad. 
That  is  one  part  of  the  line.  We  have  similar  problems  in  Italy, 
where  just  the  other  day  a  vast  number  of  trucks,  over  200,  were 
severely  damaged.  They  are  not  our  own,  fortunately,  they  are  the 
enemy's,  but  it  will  indicate  to  you,  I  believe,  the  supply  problem — the 
transport  problem — that  we  face,  both  in  this  country  and  in  foreign 
theaters  as  we  move  into  them. 

That  I  think,  about  covers  the  broad  problem  of  supply  and  require- 
ments, but  a  more  complete  statement  is  contained  in  the  report  which 
Mr.  Whitney  and  I  have  made  available  to  your  committee.1 

Mr.  Whitney  has  gone  very  fully  into  the  highly  technical  and 
complex,  and  heretofore  not  too  fully  explained,  problem  of  rayon 
versus  cotton  cord,  and  I  assume  that  you  would  like  to  hear  from  him. 

Senator  Stewart.  Mr.  Chairman,  is  it  permissible  for  nonmembers 
of  the  committee  to  interrogate? 

The  Chairman.  Yes,  sir ;  nobody  at  this  table  is  barred  from  asking 
questions.  I  usually  give  the  members  of  the  committee  an  opportu- 
nity to  ask  questions  first.     Senator  Connally  ? 

Senator  Connally.  Go  ahead,  Senator. 

The  Chairman.  Proceed,  Tom. 

EXPANSION  OF   CAPACITY  FOR  PRODUCTION   OF  RAYON   TIRE   CORD 

Senator  Stewart.  I  had  in  mind  a  question  or  two  I  wanted  to  ask 
the  witness.  What  will  be  the  approximate  shortage  of  rayon  cord  this 
next  year  % 

Mr.  Jacobson.  At  the  moment  on  the  books  there  is  a  shortage  of 
about  40,000,000  pounds  against  their  minimum  net  requirements.  In 
other  words,  the  206,000,000  pounds,  less  the  42,000,000  pounds,  would 
give  us  164  in  requirements,  and  we  will  have  around  124  in  production 
or  in  actual  output. 

Senator  Stewart.  You  first  stated,  as  I  understood,  that  the  require- 
ments were  about  206,000,000  pounds,  and  that  the  facilities  for  de- 
veloping or  manufacturing  that  rayon  cord  were  limited  so  as  to  manu- 
facture only  about  112,000,000  pounds,  or  just  a  little  more  than  half 
the  needed  amount.     As  of  what  date  do  these  figures  obtain  ? 

Mr.  Jacobson.  That  is  as  of  about  August  21  that  we  got  that 
information. 

Senator  Stewart.  August  21,  1943  ? 

Mr.  Jacobson.  1943 ;  yes,  sir. 

Senator  Stewart.  If  I  caught  your  figures  correctly,  that  would 
make  your  shortage  considerably  above  40,000,000  pounds. 

Mr.  Jacobson.  I  perhaps  didn't  explain  that  too  fully,  Mr.  Senator. 
The  112,000,000  pounds  that  I  was  speaking  about  was  as  of  the  day 
on ;  which  we  started  our  investigation  into  this  proposition.  Since 
that  time  an  additional  facility  has  been  approved,  out  of  which  we 
hope  to  get  an  additional  6,000,000  pounds  in  1944.  In  addition  to 
that,  we  are  figuring  into  the  over-all  picture  some  6,000,000  pounds 
coming  from  Canada.  Those  two  6's  plus  the  112  that  was  in  sight 
at  the  beginning  of  our  investigation  would  provide  in  1944  the  124 
million  as  against  the  164  million  net  requirement  for  1944. 

Senator  Ferguson.  What  cord  facility  do  you  now  have  under  con- 
struction that  may  help  ? 

1  See  Exhibit  No.  906,  appendix,  pp.  8900-8937. 


8520     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Mr.  Jacobson.  Tire  cord  ? 

Senator  Ferguson.  Yes. 

Mr.  Jacobson.  We  have  43,000,000  existing  domestic  capacity.  We 
have  the  difference  between  that  and  the  194,  namely,  151,000,000 
pounds  under  conversion  or  construction. 

Senator  Ferguson.  Then  what  have  you  planned  in  the  future  ? 

Mr.  Jacobson.  Mr.  Whitney  and  I,  after  making  our  study  of  this, 
have  recommended  that  an  additional  40,000,000  pounds  of  capacity  be 
converted  to  the  production  of  high  tenacity  rayon  yarn. 

Senator  Ferguson.  When  you  say  converted,  do  you  mean  using  the 
machines  that  are  now  making  cotton  ? 

Mr.  Jabobson.  No,  these  are  machines  that  are  now  producing  civil- 
ian type  rayon  yarn,  the  ordinary  type  of  viscose  yarn. 

Senator  Ferguson.  That  is  cloth  machines  ? 

Mr.  Jacobson.  They  make  the  yarn  that  goes  into  the  cloth  that 
goes  into  women's  dresses  and  things  like  that. 

Senator  Ferguson.  And  you  are  going  to  convert  those  machines 
over  to  making  rayon  cord  for  tires  ? 

Mr.  Jacobson.  That  has  been  Mr.  Whitney's  and  my  recommenda- 
tion, yes,  sir. 

Senator  Ferguson.  Have  you  any  new  machines  under  construc- 
tion? 

Mr.  Jacobson.  There  are  in  that  facilities  program,  which  is  going 
ahead  now,  some  new  machines  that  are  coming  in.  It  is  not  entirely 
a  new  construction  job.  It  is  a  conversion  and  expansion  job :  some 
new  equipment,  some  old  equipment. 

Senator  Ferguson.  Are  you  converting  any  machines  that  are  mak- 
ing cotton  cord  to  rayon? 

Mr.  Jacobson.  No,  sir. 

Senator  Ferguson.  That  has  not  been  done  ? 

Mr.  Jacobson.  No,  sir.    * 

Senator  Ferguson.  Do  you  anticipate  that  you  will  do  that  ? 

Mr.  Jacobson.  I  don't  know,  Mr.  Senator,  that  I  have  quite  clearly 
in  mind  what  you  mean. 

Senator  Ferguson.  Cian  you  convert  machines  that  are  making 
cotton  cord  to  rayon  cord  machines  ? 

Mr.  Jacobson.  I  see  what  you  mean  now.  I  had  been  speaking  of 
the  manufacture  of  rayon  yarn  which  is  then  woven  into  a  fabric, 
and  that  fabric  can  be  produced  on  either  machines  that  would  nor- 
mally manufacture  a  cotton  fabric,  or  they  can  be  manufactured  on 
new  machines  that  might  be  provided. 

Senator  Connallt.  Mr.  Jacobson,  what  is  your  title  over  in  the 
War  Production  Board  ? 

Mr.  Jacobson.  I  am  a  special  assistant  to  Mr.  Nelson. 

Senator  Connally.  Have  you  any  particular  kind  of  duties,  or  are 
you  just  a  general  utility  man? 

Mr.  Jacobson.  General  utility  man. 

Senator  Connally.  What  was  your  business  before  you  came  with 
the  War  Production  Board? 

Mr.  Jacobson.  From  1931  until  I  resigned  in  1942,  I  was  with  the 
Chase  National  Bank  of  New  York. 

Senator  Connally.  Have  they  got  a  rubber  department  that  qual- 
ifies you  ? 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8521 

Mr.  Jacobson.  No,  sir. 

Senator  Connally.  Chase  National  Bank.  Now,  how  much  time 
have  you  spent  on  this  rubber  program,  tires,  I  mean  in  cord  stuff, 
cotton,  and  rayon  ? 

Mr.  Jacobson.  About  1  month. 

Senator  Connally.  About  a  month  ? 

Mr.  Jacobson.  Yes,  sir. 

Senator  Connally.  And  the  War  Production  Board  presents  you 
here  as  an  expert  on  the  subject,  having  acquired  all  this  knowledge 
in  a  month  ? 

Mr.  Jacobson.  Mr.  Nelson  asked  us  to  develop  this  for  him,  to  go 
into  it  as  thoroughly  as  we  could.  Perhaps  by  appearing  first  here, 
I  am  unduly  dignifying  myself,  Senator.  I  am  more  or  less  the 
figure  man  who  adds  up  figures  and  approaches  the  problem  from 
that  angle. 

Senator  Connally.  Well,  but  you  are  testifying.  An  adding  ma- 
chine can  add  up  figures,  and  you  are  testifying  about  this  matter 
and  I  want  to  get  your  background.  I  am  not  trying  to  humiliate 
you  or  bother  you,  but  I  just  wondered  how  the  W.  P.  B.  decided  this 
whole  question  on  the  testimony  of  a  man 

Mr.  Whitney  (interposing).  Mr.  Chairman,  might  I  inject  a  word 
here  ?  I  have  been  in  business  a  good  many  years,  Senator  Connally. 
I  have  had  to  make  engineering  reports  on  all  kinds  of  subjects.  I 
first  became  acquainted  with  Mr.  Jacobson  about  a  year  ago,  when 
he  was  loaned  to  me 

Senator  Connally  (interposing).  Just  a  minute.  I  am  conducting 
this  examination. 

Mr.  Whitney.  I  would  like  to  tell  you 

Senator  Connally.  You  are  not  going  to  take  charge  of  this  meet- 
ing. Mr.  Chairman,  I  want  to  know  who  is  running  this  meeting, 
this  man  over  here  or  you? 

The  Chairman.  I  am  running  it,  sir.    What  is  the  difficulty  ? 

Senator  Connally.  I  am  perfectly  willing  for  him  to  intervene, 
but 

Mr.  Whitney.  I  would  like  to  say  a  word  in  Mr.  Jacobson's  behalf. 

Senator  Connally.  You  wait  a  minute  until  we  get  to  you. 

The  Chairman.  Proceed,  Tom. 

Senator  Connally.  I  want  to  ask  him,  but  he  is  taking  charge  of 
my  interrogation  and  everything  else.  I  want  to  be  courteous,  I 
don't  object  to  his  intervening,  but  I  object  to  his  taking  charge  of 
the  meeting  when  I  am  trying  to  interrogate  another  witness.  What 
is  it  you  want  ? 

Mr.  Whitney.  I  just  wanted  to  tell  you,  sir,  that  I  have  never  in 
all  my  experience  been  associated  with  a  man  who  helped  me  so  much, 
first  with  alloy  steel,  then  with  the  100-octane-gas  program;  who  is 
better  qualified  to  analyze  figures  and  get  results  and  delve  in  and 
check  facts.  I  have  neA^er  been  associated  with  a  man  in  whom  I  have 
greater  confidence,  and  the  work  he  has  done  and  the  help  he  has 
been  to  the  war  during  the  year  he  has  been  down  here  is  something 
that  I  think  we  should  all  recognize  and  speak  of. 

Senator  Connally.  Well,  nobody  objects  to  your  estimate  of  him, 
but  I  thought  you  might  permit  us — you  seem  to  have  taken  charge  of 
this  whole  works.     I  thought  you  might  permit  some  of  us  to  ask 

311932— 44— pt.  21 2 


8522     INVESTIGATION   OF    THE    NATIONAL    DEFENSE    PROGRAM 

questions  about  his  background  without  accepting  just  exactly  what 
you  have  to  say  about  it.    Is  that  satisfactory  ? 

The  Chairman.  Proceed,  Senator. 

Senator  Connally.  With  your  permission  now,  I  will  go  ahead. 

The  Chairman.  Ask  any  questions  you  wish,  Senator. 

Senator  (Connally.  I  don't  come  to  this  committee  very  often,  but 
the  insolence  of  some  of  these  witnesses  you  have  here  is  astounding 
to  me. 

The  Chairman.  I  don't  want  any  of  us  to  be  insolent  to  a  Senator, 
and  I  don't  believe  he  intended  to  be. 

Senator  Connally.  Now,  Mr.  Jacobson,  what  about  these  tests  you 
had ;  do  you  know  anything  about  these  tests  that  were  made  last  fall 
in  1942  as  between  the  relative  merits  of  rayon  and  cotton  ? 

Mr.  Jacobson.  I  have  been  present  at  quite  a  number  of  meetings 
and  gone  over  quite  a  number  of  tests.  I  am  not  qualified,  sir,  to 
speak  on  that.  I  would  much  prefer  to  have  Mr.  Witney  speak,  if 
that  is  all  right  with  you,  sir. 

Senator  Connally.  So  you  are  not  prepared  to  testify  as  to  the 
relative  merits  on  that  particular  test  in  October  ? 

Mr.  Jacobson.  I  would  much  prefer  to  have  Mr.  Whitney  go  into 
that,  Mr.  Senator. 

Senator  Connally.  I  am  talking  about  }^ou.  You  don't  care  to 
testify  about  that? 

Mr.  Jacobson.  That  is  right. 

Senator  Connally.  Then,  your  present  attitude  is  that  we  are 
going  to  have  to  use  all  the  rayon  we  can  get,  and  a  good  deal  of 
cotton,  too,  is  that  right  ? 

Mr.  Jacobson.  Mr.  Senator,  we  are  going  to  have  to  use  a  tremen- 
dous quantity  of  both  types  of  tire  cord.  I  am  as  firmly  convinced  of 
that  as  I  can  be  of  anything.  I  tried  to  approach  this  problem  on  a 
broad  basis,  such  as  you  would  wish  it  approached,  and  we  are  going 
to  need  all  the  cotton  and  rayon  cord  that  we  can  lay  our  hands  on 
next  year.  I  just  don't  believe  there  is  any  other  conclusion  that  can 
be  reached. 

I  think  Mr.  Nelson  felt  the  same  way ;  I  know  he  felt  the  same  way 
about  it. 

Senator  Connally.  In  what  type  of  tires  is  the  cotton  superior  ? 

Mr.  Jacobson.  Could  I  again  suggest  Mr.  Whitney  ? 

Senator  Connally.  I  want  to  know  if  you  know.  If  you  don't,  say 
so.     If  you  do  know,  tell  me. 

Mr.  Jacobson.  I  will  say  I  do  not  know. 

Senator  Connally.  That  is  all  right ;  that  is  very  frank.  In  what 
kind  of  tires  is  the  rayon  better  ? 

Mr.  Jacobson.  Similarly,  I  would  like  to  say  I  don't  know. 

Senator  Connally.  You  don't  know  ? 

Mr.  Jacobson.  That  is  right. 

Senator  Connally.  So  your  testimony  simply  really  amounts  to  the 
fact  that  you  kind  of  assembled  this  data  and  added  it  up  and  are  tell- 
ing the  committee  about  it,  is  that  right  ? 

Mr.  Jacobson.  That  is  one  interpretation  of  it,  Mr.  Senator. 

Senator  Connally.  You  give  me  yours. 

Mr.  Jacobson.  I  would  like  to  give  you  another  interpretation  on 
this,  because  I  think  it  is  important  that  we  understand  it.     There  are 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8523 

some  broad  principles  and  basic  facts  in  this  whole  thing  which  I 
think  we  have  hit  upon,  and  the  job  that  we  have  tried  to  do  goes 
beyond  adding  up  some  numbers  and  coming  out  with  the  conclusion. 
We  have  tried  to  bring  the  type  of  judgment  which  we  feel  your 
committee  would  like  to  have  brought  to  any  of  the  problems  that 
come  to  their  attention.  In  other  words,  we  have  tried  to  do  as  good 
a  job  for  you  people  as  we  possibly  could  in  making  an  impartial 
investigation  of  this. 

Senator  Connally.  That  is  all,  Mr.  Chairman. 

Senator  Bankhead.  Mr.  Jacobson,  do  I  understand  you  to  say  that 
you  have  joined  in  a  recommendation  to  increase  the  capacity  of  rayon 
Toy  40,000,000  pounds  for  the  production  of  cord  tires  ? 

Mr.  Jacobson.  Yes,  sir. 

Senator  Bankhead.  Rayon  cord  tires.  You  have  joined  in  that 
recommendation,  notwithstanding  the  fact  that  the  present  capacity 
very  greatly  exceeds  the  actual  production  ? 

Mr.  Jacobson.  That  is  right,  Mr.  Senator. 

Senator  Bankhead.  That  is  correct,  is  it? 

Mr.  Jacobson.  That  is  right.  Authorized  capacity  does  not  exceed 
actual  production. 

defense  plant  corporation  financing  of  rayon  cord  expansion 

facilities 

Senator  Bankhead.  How  much  money  is  the  Government  arranging 
or  making  available  to  these  rayon  and  rubber  people  for  the  produc- 
tion of  these  rayon  cord  tires  ? 

Mr.  Jacobson.  The  program  which  has  already  been  approved,  Mr. 
Senator,  calls  for  194,000,000  capacity. 

Senator  Bankhead.  I  asked  you  about  how  much  money  the  Govern- 
ment is  making  available  to  them  in  order  to  bring  about  that  amount. 

Mr.  Jacobson.  I  was  making  a  rather  long  answer.  The  total  cost 
of  the  program  is  about  forty-four  or  forty-five  million  dollars  of 
which  not  over  $10,000,000 — 10  million  plus  a  few  hundred  thousand 
dollars — involves  Government  money. 

Senator  Bankhead.  Are  these  manufacturers  borrowing  from  the 
Government. 

Mr.  Jacobson.  No  ;  the  10  million  is  being  constructed  under  D.  P.  C. 
authority,  with  D.  P.  C.  funds — Defense  Plant  Corporation. 

Senator  Bankhead.  What  is  that,  a  sort  of  bonus  the  War  Board  is 
putting  up  to  them  ? 

Mr.  Jacobson.  No. 

Senator  Bankhead.  What  is  it  for?  Why  is  the  War  Production 
Board  putting  up  $10,000,000? 

Mr.  Jacobson.  The  War  Production  Board  is  not,  Mr.  Senator. 
-  Senator  Bankhead.  Who  is? 

Mr.  Jacobson.  The  Defense  Plant  Corporation  is  financing  10  mil- 
lion of  it. 

Senator  Bankhead.  That  is  on  the  certificate,  isn't  it,  of  the  War 
Production  Board  ? 

Mr.  Jacobson.  Yes,  sir. 

Senator  Bankhead.  I  asked  about  the  Government.  That  includes 
all  agencies. 

Mr.  Jacobson.  Yes,  sir. 


8524     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

Senator  Bankhead.  All  right,  let's  not  be  technical  about  it.  Which- 
ever agency  does  it,  it  all  comes  out  of  the  taxpayer's  money,  so  we 
will  just  deal  now  with  the  Government,  and  the  Government  is  con- 
tributing $10,000,000  to  help  build  plants  for  these  big  rubber  com- 
panies and  the  rayon  companies,  is  that  correct;  for  the  production 
of  a  competitive  article  with  cotton,  is  that  correct? 

Mr.  Jacobson.  That  is  right,  sir. 

Senator  Bankhead.  Why  is  the  Government  making  that  contribu- 
tion? 

Mr.  Jacobson.  I  haven't  been  into  that  fully,  Mr.  Senator. 

Senator  Bankhead.  Do  you  know  of  any  need  for  it  ?  Aren't  these 
producers  amply  able,  not  only  in  their  own  financial  capacity  but  in 
their  credit  facilities,  to  get  all  the  money  they  need? 

Mr.  Jacobson.  I  would  assume  they  are,  sir. 

Senator  Bankhead.  And  these  plants  are  being  built  with  the  view 
of  permanent  manufacture  in  competition  with  cotton,  are  they  not? 

Mr.  Jacobson.  I  do  not  know. 

Senator  Bankhead.  You  would-  assume  that,  wouldn't  you,  as  a 
businessman  ? 

Mr.  Jacobson.  I  would  assume  so. 

Senator  Bankhead.  So  the  Government,  then,  is  helping  by  dona- 
tion to  build  a  competitive  business  to  cotton;  that  is  correct,  isn't  it? 

Mr.  Jacobson.  That  is  right,  sir. 

Senator  Bankhead.  You  haven't  heard  of  the  Government's  mak- 
ing any  contribution  to  the  cotton  industry  to  increase  their  capacity,, 
have  you? 

Mr.  Jacobson.  I  believe  that  an  additional  spindle  program  has  been 
under  way. 

Senator  Bankhead.  Under  way — what  do  you  mean,  under  way  ? 

Mr.  Jacobson.  I  mean  facilities  for  new  spindles  are  being  con- 
structed, some  of  which  are  going  to  cotton  plants  and  some  of  which 
are  going  to  rayon  plants.  In  addition,  in  order  to  help  the  critical 
manpower  problem  which  we  have  down  in  the  Georgia  area,  the 
Government  is  going  ahead  on  a  proposition  of  building  a  number 
of  houses  so  that  labor  can  be  attracted  into  this  Georgia  area  and 
work  in  the  cotton  mills.  They  are  having  quite  a  manpower  problem 
down  there. 

Senator  Bankhead.  That  is  a  housing  proposition,  isn't  it,  and  not 
a  production  plant  proposition? 

Mr.  Jacobson.  That  is  right,  sir. 

Senator  Bankhead.  And  they  are  doing  it  both  for  rayon  and  cot- 
ton, is  that  your  statement? 

Mr.  Jacobson.  These  houses? 

Senator  Bankhead.  The  housing  proposition. 

Mr.  Jacobson.  The  houses  that  I  was  speaking  of  were  all  for  the 
cotton  plants  down  in  Georgia. 

Senator  Bankhead.  You  mentioned  rayon  in  connection  with  it  just 
now — cotton  and  rayon,  as  I  understood  you  to  say. 

Mr.  Jacobson.  It  is  the  cotton  plants  in  Georgia  to  which  I  was 
referring. 

Senator  Bankhead.  Do  you  know  whether  the  Government  has  ex- 
pended that  money  or  not? 

Mr.  Jacobson.  It  has  not  as  yet. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8525 

Senator  Bankhead.  How  much  has  it  authorized  to  be  expended, 
do  you  know? 

Mr.  Jacobson.  I  do  not  know. 

Senator  Bankhead.  It  is  just  in  process — some  petition  or  applica- 
tion or  discussion  pending,  is  that  the  idea? 

Mr.  Jacobson.  Mr.  Nelson  has  indicated  that  he  has  approved  the 
program  for  going  ahead  and  doing  just  that  sort  of  thing. 

Senator  Bankhead.  That  is  in  line  with  all  of  these  housing  pro- 
grams in  connection  with  production  plants,  isn't  it — part  of  the 
general  housing  program  ? 

Mr.  Jacobson.  That  is  right,  sir. 

Senator  Bankhead.  Just  an  incidental  part  of  it. 

Some  of  them  will  be  psed  in  the  neighborhood  of  the  cotton  mills. 

Do  you  know  whether  the  10,000,000  you  mention  is  the  limit  that 
the  rubber  companies  and  the  rayon  companies  are  getting  from  the 
Government  on  that  project  ? 

Mr.  Jacobson.  As  far  as  the  high  tenacity  rayon  cord  program  that 
has  been  approved,  that  is  correct.  We  do  not  know  at  this  time  what 
Government  financing,  if  any,  will  be  involved  in  the  40,000,000- 
pound  conversion  we  have  recommended. 

Senator  Bankhead.  As  far  as  anything  is  concerned,  where  they 
are  producing  in  competition  with  cotton.  Are  they  producing  any- 
thing else  in  competition  and  displacement  of  cotton. 

Mr.  Jacobson.  Not  that  I  know  of,  sir. 

Senator  Bankhead.  Don't  they  get  the  money  spent  on  these  plants 
charged  off  over  a  certain  number  of  years? 

Mr.  Jacobson.  I  would  assume  so ;  yes,  sir. 

Senator  Bankhead.  At  what  rate? 

Mr.  Jacobson.  I  do  not  know,  sir. 

Senator  Bankhead.  You  don't  know.  Still  you  are  advising  that 
this  program  be  carried  out  and  extended  and  enlarged. 

Mr.  Jacobson.  Yes,  sir ;  in  the  interest  of  the  war  effort. 

Senator  Bankhead.  Don't  they  in  4  or  5  years  get  it  all  charged  off — 
depletion  or  depreciation,  some  item,  I  don't  know  exactly  what  you 
call  it?  Don't  they  get  it  all  charged  off  on  their  taxes  within  4  or 
5  years  ? 

Mr.  Jacobson.  I  am  not  an  expert  on  that,  sir,  but  I  believe  that  is 
true. 

Senator  Bankhead.  You  believe  that  is  true.  You  at  least  have 
heard  it  as  you  went  around  in  those  circles.  You  have  heard  it,  so 
that  the  result  is  that  millions  of  dollars  there — how  much  did  you 
say  these  total  investments  are  going  to  be  for  rayon  production  ? 

Mr.  Jacobson.  About  $44,000,000  is  in  the  existing  approved 
programs. 

Senator  Bankhead.  So  in  4  or  5  years,  that  will  all  be  charged  off 
and  these  rayon  producers  will  have,  without  further  cost,  plants  ag- 
gregating around  forty  or  fifty  million  dollars  to  continue  their  com- 
petition with  cotton.     That  is  correct,  isn't  it? 

Mr.  Jacobson.  I  wish  I  were  a  tax  expert  and  could  answer  "Yes." 

Senator  Bankhead.  That  is  your  understanding,  isn't  it? 

Mr.  Jacobson.  Not  quite,  sir. 

Senator  Bankhead.  What  is  your  understanding  about  that?  I 
want  the  facts.     That  is  all  I  want. 


8526     INVESTIGATION   OF   THE    NATIONAL    DEFENSE   PROGRAM 

Mr.  Jacobson.  I  believe  in  that  connection  that  they  cannot  charge 
off  all  of  these  investments  that  rapidly.  Moreover,  you  have  the 
proposition  that  they  have  invested  their  own  money  to  a  considerable 
extent.  I  don't  personally  care  whether  the  rayon  companies  have 
invested  a  penny  or  not  in  this.  To  me,  if  it  is  important  in  the  war 
effort,  that  is  the  sole  criterion  which  I  have. 

Senator  Bankhead.  Regardless  of  its  results  after  the  war  on  com- 
petitive products? 

Mr.  Jacobson.  I  would  like,  sir,  to  think  about  after  the  war 

Senator  Bankhead  (interposing).  Now  if  the  Government  put  up 
the  money,  couldn't  the  production  capacity  of  cotton  tire  cord  be 
increased  in  the  same  way  that  rayon  can  be  ? 

Mr.  Jacobson.  The  production  of  cotton  cord  will  be  increased. 

Senator  Bankhead.  But  the  Government '  and  your  Board  are  not 
taking  any  steps  toward  bringing  about  an  increase  in  the  production 
of  cotton  cord  tires,  are  they  ? 

Mr.  Jacobson.  Yes;  they  are. 

Senator  Bankhead.  Well,  what  are  they  doing? 

Mr.  Jacobson.  There  are  at  least  three  steps. 

Senator  Bankhead.  I  mean  in  the  way  of  financing  now  like  they 
are  doing  with  rayon. 

Mr.  Jacobson.  In  terms  of  building  new  plants  ? 

Senator  Bankhead.  Yes. 

Mr.  Jacobson.  I  think  the  answer  to  that  is,  no,  sir ;  they  are  not. 

Senator  Bankhead.  All  right  that  is  fair.  Now,  they  are  not  pro- 
posing to  give  any  priority  orders,  either,  are  they,  for  material  to 
build  additional  equipment — equipment  material  for  increasing  the 
production  of  cotton  cord  tires?  They  are  giving  all  that  to  rayon, 
aren't  they — the  priority  orders? 

Mr.  Jacobson.  They  are  giving  priority  orders  to  rayon,  that  is  true. 

Senator  Bankhead.  And  you  know  of  none  they  are  giving  to  cotton. 

Mr.  Jacobson.  They  will  be  giving  them  to  houses. 

Senator  Bankhead.  On  houses.  I  asked  you  about  priority  orders 
for  equipment  for  cotton  plants. 

Mr.  Whitney.  Yes ;  there  are  priority  orders  to  cotton  plants  pro- 
ducing cotton  cord. 

Senator  Bankhead.  Let  this  witness  answer.  You  are  too  intelli- 
gent to  be  interrupting  that  way  and  making  suggestions  to  a  witness. 

Mr.  Jacobson.  High  priorities  will  be  given,  I  am  sure. 

Senator  Bankhead.  Will  be  ?     You  are  ruling  for  the  Board  now  ? 

Mr.  Jacobson.  No,  sir. 

Senator  Bankhead.  But  they  haven't  been,  and  they  have  been 
given  to  rayon  for  a  year,  haven't  they,  continuously  from  time  to  time 
to  increase  them,  notwithstanding  the  protests  that  have  been  entered,. 
notAvithstanding  the  ruling  and  finding  of  this  Truman  committee,  one 
of  the  greatest  committees  recognized  everywhere,  that  Congress  has 
created,  that  it  ought  not  to  be  done;  still  you  are  going  on  giving 
priorities  to  the  rayon  and  rubber  people  ? 

Mr.  Jacobson.  May  I  say,  sir 

Senator  Bankhead  (interposing).  Wait  a  minute.  Answer  my 
question.    Isn't  that  a  fact? 

Mr.  Jacobson.  Yes;  that  is  correct,  sir. 

Senator  Bankhead.  That  is  correct,  taking  the  thing  into  their  own 
power.     It  is  going  on  regardless  of  everything  else  and  giving  the 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8527 

Government's  money  away,  and  giving  priority  orders  away  to  set  up 
very  substantial  programs  which  ultimately  will  be  a  free  investment 
for  rayon  and  rubber  in  competition  with  the  poorest  paid  farmers 
in  America,  made  up  in  large  part  of  tenants,  colored  as  well  as  white. 
You  are  setting  up  here  now  the  rayon  and  rubber  companies  in  com- 
petition with  that  class  of  the  citizens  of  this  country.  That  is  going 
on,  isn't  it? 

Mr.  Jacobson.  May  I  say  one  thing  at  this  point,  Mr.  Senator:  I 
come  from  Montana.     I  come  from  an  agricultural  area. 

Senator  Bankhead.  I  am  not  asking  you  about  your  attitude.  I 
am  assuming  that  your  character  is  clean,  although  you  have  had  a 
great  bank  environment,  and  sometimes,  you  know,  that  changes  a 
man's  attitude  toward  the  poor. 

Mr.  Jacobson.  You  can  be  a  member  of  a  great  bank  and  still  not  be 
rich. 

Senator  Bankhead.  I  know,  but  you  have  got  an  environment  when 
you  are  in  there.  You  hear  big  figures  discussed.  You  forget  about 
little  fellows  with  families  living  on  two  or  three  hundred  dollars  a 
year.  You  are  liable  to,  at  least,  when  you  are  in  the  atmosphere  of 
such  an  institution  as  Chase  National  Bank ;  but  I  am  not  going  into 
that.     I  haven't  impunged  your  motives  at  all. 

Mr.  Jacobson.  Thank  you,  Mr.  Senator. 

Senator  Connallt.  Senator,  right  there  may  I  ask  one  question? 
May  I  interrogate  you?  What  are  the  names  of  these  rayon  com- 
panies that  are  going  to  get  these  45  million  ? 

Mr.  Jacobson.  American  Viscose  Corporation,  North  American 
Rayon,  American  Enka,  du  Pont 

Senator  Connallt  (interposing) .  Du  Pont  is  in  a  bad  way;  it  needs 
the  money,  doesn't  it  ? 

Mr.  Jacobson.  I  haven't  looked  at  their  balance  sheet  for  a  long 
time,  Mr.  Senator,  but  I  never  knew  they  were  in  a  bad  way.  The 
other  one  is  Industrial  Rayon. 

Senator  Bankhead.  What  rubber  companies  are  in  this  deal? 

Mr.  Jacobson.  Mr.  Senator,  I  know  of  no  rubber  companies  that  are 
in  any  deal  in  connection  with  this.  We  have  tried  to  look  into  that  as 
carefully  as  we  can. 

Senator  Bankhead.  Aren't  they  going  to  produce  these  tires  ? 

Mr.  Jacobson.  The  tire  companies;  yes,  sir;  will  have  to  produce 
the  tires. 

Senator  Bankhead.  Well,  then,  they  get  the  work  out  of  it. 

Mr.  Jacobson.  That  is  right,  sir,  and  theirs  is  the  job  to  turn  out 
the  number  of  tires  that  we  are  going  to  need  next  year,  and  it  is  a 
tremendous  job,  Mr.  Senator.     It  really  is. 

Senator  Bankhead.  Yes;  but  you  don't  know  anything  about  the 
technical  phases  of  this  construction  of  rayon  and  cotton. 

Mr.  Jacobson.  I  am  not  qualified  to  speak  on  that,  Mr.  Senator. 

The  Chaikman.  We  are  trying  to  make  a  record  to  find  out  just 
exactly  what  this  report  showed  on  the  construction  of  rayon  and 
cotton  cord.  If  you  gentlemen  will  give  me  a  chance  to  get  this  record 
made,  then  I  want  you  to  ask  all  the  questions  you  care  to.  I  don't 
want  to  interrupt  you,  Senator,  you  are  perfectly  welcome  to  ask  any 
questions  you  want,  but  I  am  trying  to  get  a  record  to  find  out  what 
the  tests  showed  with  regard  to  rayon  and  cotton  cord. 


8528     INVESTIGATION   OF    THE    NATIONAL    DEFENSE    PROGRAM 

Senator  Bankhead.  I  am  for  you  100  percent. 

The  Chairman.  After  we  get  that  information,  then  I  am  perfectly 
willing  to  have  any  questions  asked  that  any  Senator  wants  to  ask, 
on  any  question  he  wants  to  ask  it,  but  I  want  to  let  Mr.  Whitney 
proceed  to  give  the  results  of  the  tests  in  which  we  are  interested  in 
the  special  report  which  he  got  out  for  the  War  Production  Board. 

Will  you  proceed  now  with  your  statement,  Mr.  Whitney? 

RESULTS  OF  TESTS  OF  COTTON  AND  RAYON  CORD  TIRES 

Mr.  Whitney.  Mr.  Senator,  I  would  like  first  to  review  the  terrific 
problem  with  which  we  were  faced  after  Pearl  Harbor.  No  real  stock 
pile  of  natural  crude  rubber  had  been  built  up,  and  within  2  years  we 
had  to  be  in  production  making  tires  out  of  synthetic  rubber  in  larger 
quantities  than  we  had  ever  made  truck  tires  before  in  our  history. 
We  had  no  experience  back  of  us  on  any  real  production  basis,  either  of 
producing  the  rubber  or  of  making  the  tires  out  of  it,  and  I  should 
say  that  the  amount  of  research  work  done  up  to  today,  test  fleets, 
research  by  the  rubber-tire-company  laboratories,  is  equivalent  to 
upward  of  20  years  of  research  work  in  normal  times. 

Now,  these  companies  had  different  backgrounds.  A  few  of  the 
major  companies  had  done  work  with  synthetic  rubber  and  had  been 
doing  research  in  connection  with  the  petroleum  and  other  companies 
that  were  trying  to  develop  synthetic  rubber,  but  that  data  was  all  very 
secret  and  each  company  kept  its  information  to  itself  and  gave  out 
nothing. 

The  Rubber  Director  had  to  get  the  rubber  produced;  he  had  to 
have  the  tires  made.  There  were  lots  of  differences  of  opinion  as  to 
how  this  synthetic  rubber  should  be  mixed,  whether  you  should  put 
it  all  on  the  tread  and  use  the  gum  rubber  in  the  carcass  of  the  tire, 
or  whether  you  should  mix  it  in  both ;  whether  you  could  use  the  syn- 
thetic rubber  as  the  cement  between  the  different  plies  or  whether  you 
had  to  use  natural  gum  rubber.  Those  were  very  controversial  ques- 
tions. In  the  laboratory  test,  they  have  these  wheels.  They  blow  a 
tire  up  and  put  it  on  a  wheel  and  run  it  over  a  drum  with  cleats  on 
it,  and  then  they  vary  the  load,  increase  the  load  every  500  miles  until 
the  tire  blows  out,  and  find  out  what  causes  the  failures,  how  hot  it 
runs,  all  that  sort  of  thing,  testing  out  the  various  types  of  construction. 

From  a  research  and  development  point  of  view,  it  has  been  a  per- 
fectly gigantic  task,  and  what  they  have  done,  I  think,  what  they  have 
accomplished  today,  is  very  extraordinary. 

Now,  referring  to  the  tests  on  the  tires  which  you  saw  when  you 
made  your  report,  and  the  operating  test  courses,  and  so  forth,  there 
were  questions  about  some  of  them.  From  my  own  point  of  view, 
after  investigation  (and  having  had  to  make  up  my  mind  on  situations 
of  a  similar  nature  a  good  many  times)  the  trend  to  me  from  those 
earlier  tests  was  that  on  the  larger  tires,  the  rayon  was  infinitely  su- 
perior, not  infinitely  superior  on  all,  but  on  the  8.25  and  larger,  yes ; 
on  the  medium,  that  it  was  not  definite,  and  on  the  smaller,  that  the 
rayon  wasn't  needed. 

I  went  over  the  courses.  I  haven't  been  down  to  the  courses.  I  have 
seen  a  movie  of  the  much  discussed  Normoyle  course.  I  was  in  France 
about  a  year  in  the  last  war,  and  I  would  say  that  parts  of  that  test 
course  were  a  boulevard  in  comparison  to  some  of  the  places  that  I 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8529 

took  trucks  in  the  last  war.  We  were  one  of  the  few  motorized  outfits 
over  there. 

In  the  earlier  tests  many  of  the  companies  were  mixing  their  rubber 
in  a  little  different  way.  They  were  making  the  tire  in  a  little  different 
way.  There  were  bound  to  be  a  terrific  number  of  variables.  These 
tests  were  being  run  to  determine  how  to  build  a  synthetic  rubber  tire. 
They  used  every  kind  of  cord  that  was  offered.  No  company  was  held 
back.    Every  tire  company  could  submit  any  samples  it  wanted  to. 

So  you  have  ups  and  downs.  You  have  good  rayon ;  you  have  poor 
rayon.  You  have  good  cotton;  you  have  poor  cotton;  and  in  those 
tests  there  were  so  many  variables  that  all  you  could  get  out  of  them 
was  a  trend :  What  did  it  show  on  the  average  of  averages  ? 

I  looked  those  over  and  then  I  was  quite  fascinated.  I  wanted  to 
know  what  fundamental  technical  data  there  was.  I  had  never  seen 
any  consolidation  of  the  work  done  in  the  laboratories  over  a  period 
of  years.  Remember,  now,  the  controversy  of  rayon  cord  versus  cotton 
cord  has  been  going  on  for  nearly  10  years,  and  so  I  got  together 
with  the  technical  men  of  the  tire  companies.  There  has  been  no 
technical  work  done  on  tire  cord,  that  I  know  of  or  have  been  able  to 
find,  outside  of  these  rubber  company  laboratories. 

Remember  that  these  rubber  companies,  these  tire  companies,  own 
about  95  percent  of  all  the  cotton  spinning  facilities  and  of  all  of  the 
cotton  twisting,  making  it  into  cord.  Goodyear  have  an  enormous 
investment  in  a  cotton  plantation  out  near  Phoenix,  Ariz.  The  tech- 
nical men  of  these  companies  are  all  cotton  textile  experts,  with  one 
exception,  only  one  man  of  the  whole  group,  and  he  is  a  chemical  engi- 
neer. The  others  all  grew  up  in  cotton  mills ;  they  went  to  the  southern 
cotton  and  textile  technical  schools ;  in  fact,  they  are  made  of  cotton. 

The  investment  of  the  tire  companies  was  in  cotton,  in  cotton  mills, 
cotton-twisting  facilities,  cord-making  facilities.  They  had  every 
reason  in  the  world  to  continue  to  use  these  plants  in  which  they  had 
these  enormous  investments — every  reason.  I  always  try  to  consider 
how  the  technical  data  that  I  get  is  flavored  by  the  head  office.  I  have 
had  some  sad  experiences  when  I  couldn't  get  the  truth  because  they 
wouldn't  let  the  technical  men  tell  the  truth. 

Senator  Stewart.  You  say  the  technical  men  wouldn't  tell  the 
truth? 

Mr.  Whitney.  They  wouldn't  let  them. 

Senator  Stewart.  Who  wouldn't  ? 

Mr.  Whitney.  The  head  offices  of  some  companies.  This  is  past  ex- 
perience. 

Senator  Stewart.  Oh,  that  is  something  that  has  been  abandoned  ? 

Mr.  Whitney.  I  mean,  I  have  had  it  happen  to  me  in  other  cases 
where  I  was  getting  data. 

Senator  Stewart.  You  don't  mean  to  say  it  has  been  occurring  here  ? 

Mr.  Whitney.  I  do  not  think  so,  sir. 

The  background  of  these  men,  every  one  of  them,  is  such  that  they 
wanted  to  prove  cotton  better.  They  have  been  working  on  cotton, 
trying  to  make  it  better.  The  U.  S.  Rubber  have  done  more  work  on 
the  processing  of  cotton  to  make  the  cord  better  than  any  company  of 
which  I  know,  and  they  are  coming  out  with  a  new  process  now  that 
they  are  going  to  grant  license  free,  and  we  are  in  high  hopes  that 
is  going  to  improve  the  cord  so  that  we  can  make  these  7.50-20/8-ply 


8530     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

instead  of  10-ply,  because  the  thicker  we  make  the  tire,  the  hotter  it 
is  going  to  run. 

Senator  Maybank.  What  are  they  going  to  make  them  of,  cotton  or 
rayon,  this  new  process  you  are  speaking  of  ? 

Mr.  Whitney.  Cotton,  sir ;  and  mercerized  cotton. 

Senator  Maybank.  The  reason  I  asked  that,  their  big  plant  is  in  the 
State  I  am  from,  and  they  are  having  an  exhibition,  as  you  know, 
sometime  next  month  I  believe  it  is. 

Mr.  Whitney.  Which  plant  ? 

Senator  Maybank.  At  Winnsboro,  S.  C,  the  big  tire  mills  that  are 
there.     The  United  tire  companies  have  their  big  mill  there  ? 

Mr.  Whitney.  The  U.  S.  Kubber  Co.  ? 

Senator  Maybank.  Yes.  They  are  there,  and  they  are  going  to 
have  this  exhibition  in  Washington,  and  I  have  been  invited  by  the 
manager  and  so  forth,  and  he  wanted  me  to  come.  That  is  why  I 
asked  that  question.  And  that  new  excellent  tire  is  going  to  be  made 
out  of  cotton  ? 

Mr.  Whitney.  Yes,  sir ;  they  are  working  on  a  cotton  cord. 

Senator  Maybank.  So  they  are  proving  they  can  do  something  well 
worthwhile  with  cotton  for  a  big  tire  ? 

Mr.  Whitney.  Sir,  that  looks  awfully  doubtful  to  me,  because 
your 

Senator  Maybank  (interposing).  It  looks  doubtful  to  you,  but  you 
say  they  are  making  it  out  of  cotton  ? 

Mr.  Whitney.  No  ;  just  a  minute,  sir ;  because  a  cotton  cord  of  equal 
strength  is  approximately  42  percent  greater  in  diameter  than  a  rayon 
cord. 

Senator  Maybank.  I  am  not  interested  in  the  percentages  as  much  as 
I  am  in  the  statement  that  you  made,  as  I  understood  you  to  say  that 
that  new  type  of  tire  is  to  be  made  out  of  cotton,  primarily. 

Mr.  Whitney.  Well,  it  isn't  a  new  type  of  tire,  sir.  It  is  a  new  type 
of  cord. 

Senator  Maybank.  That  is  technical. 

Mr.  Whitney.  Oh,  no ;  it  is  an  improvement  on  cotton,  natural  cot- 
ton cord  the  way  it  has  been  made  in  the  past. 

Senator  Maybank.  It  is  cotton  ? 

Mr.  Whitney.  Yes,  sir ;  surely. 

Senator  Maybank.  That  is  what  I  wanted  to  get. 

Mr.  Whitney.  The  only  old  operating  data  was  some  the  Air  Corps 
had;  the  Air  Corps  had  started  to  shift  from  cotton  to  rayon  some 
few  years  ago,  and  they  showed  an  over-all  improvement  in  their 
rayon  tires  of  approximately  35  percent — they  last  35  percent  longer — ■ 
and  we  have  just  been  informed  by  the  Air  Corps  that  their  require- 
ments for  1944,  instead  of  being  stepped  up  very  materially,  are  going 
to  be  about  as  they  were  originally  because  of  the  tremendous  number 
of  rayon  cord  tires  which  they  find  they  can  recap. 

You  can  recap  a  rayon  cord  tire  because  the  carcass  does  not  blow 
out,  from  two  to  three  times;  whereas  a  very  high  average  on  a  cot- 
ton cord  carcass  is  one  recap.  After  the  Air  Corps,  I  went  to 
the  truck  companies,  the  Inter-City,  the  National  Associations  of  Bus 
and  Truck  Operators;  I  have  here  reports  from  the  Greyhound  Cor- 
poration Public  Service  Coordinated  Transport  (all  the  Public  Servr 
ice   companies),   the   Interstate    Transit   Lines,    Tri-State   Transit, 


INVESTIGATION"   OF   THE    NATIONAL    DEFENSE    PROGRAM     8531 

Louisiana,  Burlington  Transportation  Co. — that  is  one  of  the  Trail- 
ways,  Southeastern  Greyhound  Lines,  and  then  a  statement  from 
the  Goodyear  Rubber  Co.j  who  put  out  a  lot  of  contract  tires. 

Now  the  average  improvement  in  service  through  the  past  three 
years  on  rayon  cord  tires — and  all  of  the  companies  admit  that  they 
are  carrying  today  25  to  30  percent  heavier  overloads  than  they  car- 
ried before,  that  they  are  getting  even  with  that  25  or  30  percent 
overload  an  average  of  30  percent  greater  mileage  out  of  the  rayon 
cord  tires  than  they  are  out  of  the  cotton  cord  tires,  and  these  were 
over  a  year's  operation.  I  cite  you  one,  for  instance,  the  Burlington 
Transportation  Co.,  one  of  the  Trailways  group,  reports  on  operations 
with  contract  mileage  tires  west  of  the  Missouri  River  as  follows : 

On  this  contract,  during  the  period  March  1942  to  February  1943, 
inclusive,  276,  size  11.00/20  and  11.00/22,  rayon  cord  tires  removed 
from  service,  averaged  71,532  miles.  You  remember  when  we  thought 
3,000  miles  was  a  long  run  for  a  tire.  This  is  69  percent — 69  percent 
greater  average  mileage  than  was  obtained  during  the  same  period — 
that  is  March  '42 — February  '43,  inclusive,  on  89  cotton  cord  tires 
of  the  same  sizes,  that  is  11.00/20  to  11.00/22,  removed  from  operation 
east  of  the  Missouri  River. 

The  temperatures  and  road  conditions  east  of  the  Missouri  River 
are  better  than  they  are  west  of  the  Missouri  River,  and  that  69  per- 
cent is  this  last  year  of  operation,  both  east  and  west  of  the  river, 
and  on  the  rayon  and  cotton  cords  they  were  presumably  operating 
with  about  the  same  overload.  In  other  words,  the  busses,  if  you 
have  been  in  them — I  have  this  past  summer,  every  human  being 
that  can  be  gotten  into  the  bus  is  in  the  bus ;  I  don't  know  how  they 
could  get  any  more  in. 

Mr.  Halley.  Mr.  Whitney,  you  referred  to  the  past  experience  of 
the  bus  companies  and  the  air  force.  Was  that  experience  with 
natural  or  synthetic  rubber? 

Mr.  Whitney.  This  was  all  with  natural  rubber,  every  bit  of  this 
past  history  was  all  with  natural  rubber. 

Mr.  Halley.  Now  do  you  recall  whether  or  not  any  scientific  tests 
were  conducted  to  bring  out  the  relative  merits  of  cotton  and  rayon 
cord  in  tires  made  of  natural  rubber  ? 

Mr.  Whitney.  The  same  kind  of  scientific  technical  research,  Mr. 
Halley,  was  conducted  by  the  tire  companies  when  they  were  going 
through  the  stage  of  developing  rayon  cord  tires,  and  trying  to  stay 
with  the  cotton,  to  keep  rayon  out;  they  were  constantly  testing,  test- 
ing, testing,  and  then  they  put  these  tires  on  their  own  industry  test 
fleets  and  each  company  ran  4  or  5  trucks  or  busses  out  on  the  country 
roads,  just  testing  the  tires,  doing  nothing  else. 

Mr.  Halley.  Is  it  not  a  fact,  though,  that  in  November  and  Decem- 
ber of  1942  the  United  States  Army  conducted  tests  on  natural  rubber 
tires  with  cotton  and  rayon  carcasses? 

Mr.  Whitney.  They  did,  sir. 

Mr.  Halley.  And  are  you  acquainted  with  Capt.  J.  J.  Robson,  who 
conducted  those  tests  ? 

Mr.  Whitney.  I  am,  sir,  very  well. 

Mr.  Halley.  And  have  you  had  an  opportunity  to  form  an  impres- 
sion of  his  technical  qualifications? 


8532     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Mr.  Whitney.  I  have;  I  sat  in  with  him  individually  with  other 
gentlemen  and  at  the  meeting  of  the  Pneumatic  Tire  Ordnance  Ad- 
visory Committee  in  Akron. 

Mr.  Halley.  And  what  is  your  opinion  of  his  technical  ability  ? 

Mr.  Whitney.  I  think  that  he  has — he  is  a  young  man  but  he  has 
really  great  ability  and  he  is  a  very  good  analyzer ;  my  God,  he  has 
courage  and  he  goes  ahead  and  gets  things  done,  which  is  one  thing 
we  had  to  do,  we  had  to  move  and  move  fast. 

Mr.  Halley.  Well,  did  he  advise  as  to  the  results  of  these  tests  on 
natural  rubber  tires  % 

Mr.  Whitney.  He  went  over  the  tests  with  me  and  I  asked  him  ques- 
tions about  all  the  tests,  from  which  I  drew  my  own  conclusions. 

Mr.  Halley.  Well,  I  would  like  to  read  you  a  bit  of  a  record  which 
this  committee  made  in  a  private  hearing  with  Captain  Robson,  and 
ask  you  whether  his  statements  to  the  committee  at  that  time  are  the 
same  as  his  statements  to  you.  The  question  was  asked  of  Captain 
Robson : 

Question.  So  you  would  say  that  as  far  as  natural  rubber  is  concerned,  the 
standard  gage  tire  made  from  cotton  cord  is  superior  by  something  in  excess  of 
5  percent  to  the  rayon  cord? 

Answer.  That  is  a  very  close  percentage  there.  I  would  say  that  for  our 
military  type  service  with  natural  rubber,  rayon  certainly  had  no  advantages. 

Question.  How  could  it  "certainly  have  no  advantage"  if  it  were  inferior  by 
5  percent? 

Answer.  All  right ;  it  was  inferior. 

Mr.  Whitney.  He  had  nothing  to  go  by  but  his  tests ;  that  is  all  he 
was  looking  at  in  those  particular  tests.  Now,  if  you  analyze  those 
tests,  as  I  have  said  before,  you  will  find  one  maker  who  has  been  mak- 
ing rayon  cord  tires  for  many  years,  submitting  tires  which  are  very 
much  inferior  to  rayon  cord  tires  made  by  a  maker  who  has  just  been 
making  them  for  5  or  6  months 

Mr.  Halley.  The  natural  rubber  tires,  not  the  synthetic? 

Mr.  Whitney.  Those  were  the  natural  rubber  tires ;  there  you  find 
the  same  thing;  outstanding  companies  submit  tires  you  can't  explain 
for  these  tests.  Good  Lord,  I  have  seen  it  in  steel  so  many  times, 
you  think  you  have  the  answer  and  then  you  get  a  flaw,  I  don't  care 
whether  the  alloy  is  perfectly  mixed  and  the  ingredients  are  perfect, 
give  it  a  bad  heat  treatment  and  you  ruin  it. 

Mr.  Halley.  In  any  event,  though,  were  any  further  tests  made  on 
natural  rubber? 

Mr.  Whitney.  On  natural  rubber;  no,  sir;  because  no  natural 
rubber  was  going  to  be  available*  and  why? 

Senator  Ferguson.  I  don't  think  I  got  the  answer  you  gave  to  Mr. 
Halley.  Did  the  witness  state  to  you  the  same  facts  Mr.  Halley  read 
to  you? 

Mr.  Whitney.  When  we  went  over  the  test,  he  said  yes,  the  natural 
rubber  with  rayon  cord  was  inferior.  He  didn't  question  one  thing, 
all  we  did  was  to  go  over  the  tests. 

Senator  Ferguson.  The  question  is  did  he  say  to  you  that  cotton 
was  superior  to  ravon  when  it  was  used  with  natural  rubber? 

Mr.  Whitney.  He  never  made  that  statement  to  me,  no,  sir. 

Senator  Ferguson.  Did  you  understand  what  Mr.  Halley  read  to 
you? 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8533 

Mr.  Whitney.  Yes;  I  do. 

Senator  Ferguson.  Isn't  that  what  Mr.  Halley  read  ? 

Mr.  Whitney.  If  he  did  say  that  at  a  previous  hearing,  it  was  not 
with  me ;  I  wasn't  there. 

Senator  Ferguson.  Did  he  ever  say  that  to  you  ? 

Mr.  Whitney.  No,  sir. 

Senator  Ferguson.  Did  he  ever  say  that  to  you  ? 

Mr.  Whitney.  No,  sir ;  no ;  we  didn't  discuss  it ;  we  looked  at  these 
tests ;  we  went  over  each  one  of  these  tests  and  compared  the  findings 
to  see  where  we  were  at. 

Mr.  Fulton.  I  ask  with  respect  to  these  bus  tires  where  natural 
rubber  with  cotton  didn't  turn  out  as  well  as  rayon,  whether  those 
"bus  tires  were  of  new  high-tenacity  cord? 

Mr.  Whitney.  The  new  high-tenacity  cotton  cord?  They  were  of 
the  very  best.  I  don't  know  what  you  mean  by  high  tenacity  cotton 
cord,  sir,  because  I  don't  know  of  that  definition. 

Mr.  Fulton.  Well,  were  they  of  the  type  tires  run  in  the  1942 
fall  test  which  outran  rayon  tires  in  the  Army  test  ? 

Mr.  Whitney.  I  imagine  so,  sir;  I  imagine  they  were;  I  cannot 
imagine  a  tire  company  building  cotton  cord  tires  for  contract 
mileage  work  without  putting  the  very  best  cotton  cord  in  them 
that  they  know  how  to  make. 

Mr.  Fulton.  Do  you  know  when  they  were  built? 

Mr.  Whitney.  When  the  tires  were  built? 

Mr.  Fulton.  Those  bus  tires  may  have  been  built  2  years  ago  ? 

Mr.  Whitney.  No,  sir;  because  I  don't  think  you  will  find  any  of 
the  bus  lines  carrying  very  much  of  an  inventory. 

Mr.  Fulton.  But  you  wouldn't  know  whether  they  were  the  high- 
tenacity  cord  or  not? 

Mr.  Whitney.  I  don't  know  what  you  mean  by  high-tenacity 
cotton  cord,  sir;  I  don't  know  of  any  such  cord  by  that  name. 

Mr.  Fulton.  I  see.    Well,  the  low-gage  cord  then  ? 

Mr.  Whitney.  I  am  sure  they  were  not  low-gage,  and  the  low-gage 
is  not  as  good  as  the  regular;  that  has  been — the  low-gage  has  been 
discounted  completely,  as  admitted  by  the  proponents  of  the  low- 
gage. 

Mr.  Halley.  In  any  event  was  any  attempt  made  to  find  out  why 
the  only  scientific  test  conducted  by  the  Army  on  natural  rubber 
showed  up  cotton  to  be  superior,  to  your  knowledge  ? 

Mr.  Whitney.  No;  and  I  don't  see  why  they  should  have.  What 
would  have  been  the  object?  They  knew  they  had  no  natural  rubber; 
they  had  to  make  tires  of  synethetic  rubber. 

Mr.  Halley.  But  there  was  no  prior  experience  on  synthetic 
rubber  ? 

Mr.  Whitney.  A  little.  .  . 

Mr.  Halley.  Not  enough  to  form  judgment  on. 

Mr.  Whitney.  No  ;  no,  sir. 

Mr.  Halley.  So  that  to  form  a  judgment  on  the  synthetic  rubber 
you  would  have  to  rely  on  tests  subsequent  to  November  1942 ;  is  that 
right? 

Mr.  Whitney.  Let  me  show  you  the  way  the  minds  of  those  engi- 
neers ran,  may  I  ? 


8534     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

Mr.  Halley.  May  we  just  agree  on  that  one  point,  that  in  order  to 
form  a  proper  judgment  on  synthetic  rubber  you  would  have  to  rely 
on  tests  conducted  after  November  1942  ? 

Mr.  Whitney.  Yes,  sir. 

Mr.  Halley.  Thank  you.     I  am  sorry  I  interrupted  you. 

Mr.  Whitney.  Now  the  failure  with  the  cotton  cords  and  the  wear- 
ing out,  the  failure  of  those  tires  in  natural  rubber  was  always  due  to 
high  temperature,  so  knowing  that  synthetic  rubber  runs  on  the  aver- 
age about  40°  hotter — that  is  because  of  the  molecular  structure  of  the 
synthetic  rubber,  it  is  different  and  unfortunately  it  gets  stiffer,  the 
older  the  tire  the  stiffer  it  is  going  to  get,  the  stiffer  it  is  the  more 
heat  it  generates  in  working.  Now  the  synthetic  tire  runs  40°  hotter, 
so  it  was  a  natural  assumption,  perfectly  natural  assumption,  for  any 
engineer  to  say  "My  heat  failures  with  rayon  cord  tires  have  been 
brought  to  a  practical  minimum ;  we  have  had  no  fatal  accidents  with 
blow-outs  of  front  tires,  or  practically  none,  in  the  last  3  years." 

With  rayon  cord  tires  we  have  had  no  fatal  accidents  on  our  busses 
due  to  tire  blow-outs.  Prior  to  the  advent  of  rayon  cord  tires  they 
were  very,  very  frequent,  a  great  many  fatal  accidents. 

Senator  Maybank.  How  does  that  compare  with  cotton? 

Mr.  Whitney.  A  great  many  fatal  accidents  with  cotton  cord  tires 
on  the  busses ;  all  you  have  to  do 

Mr.  Halley.  Are  you  familiar  with  Mr.  Jeffers'  testimony  before 
the  committee  on  that  subject  ? 

Mr.  Whitney.  I  am  familiar  with  Mr.  Jeffers'  testimony  on  that 
subject,  and  all  I  can  say  is  that  I  have  gone  into  this  personally;  I 
have  the  records  from  these  companies;  I  am  saying  what  I  believe 
to  be  the  truth,  what  I  have  found  out,  and  I  don't  care  what  any- 
body said  before. 

Senator  Maybank.  You  do  know  that  Mr.  Jeffers  took  the  position 
that  he  did  not  form  any  personal  judgment  from  the  experience  of 
the  bus  lines  run  by  his  company? 

Mr.  Whitney.  I  am  quite  aware  of  that. 

Senator  Maybank.  You  say  they  had  a  good  many  fatal  accidents 
in  the  last  year  or  so? 

Mr.  Whitney.  No,  sir ;  they  used  to  have ;  practically  none  of  the 
bus  lines  have  used  cotton  cords  in  the  last  few  years. 

Senator  Maybank.  Well,  the  last  year  or  so,  though,  has  been  the 
only  time  they  have  used  rayon. 

Mr.  Whitney.  No,  sir ;  many  of  these  companies  have  been  running 
on  rayon  tires.  One  of  the  principal  intercity  bus  operators  in  the 
South  hasn't  used  a  cotton  cord  tire  in  3  years. 

Senator  Maybank.  That  is  intercity? 

Mr.  Whitney.  I  beg  your  pardon? 

Senator  Maybank.  .  You  said  intercity  ? 

Mr.  Whitney.  Intercity,  high-speed  intercity  truck  and  bus. 

Senator  Ferguson.  Could  speed  have  anything  to  do  with  that? 

Mr.  Whitney.  Yes;  a  great  deal  to  do  with  it  because  the  higher 
the  speed,  the  more  heat  you  generate. 

Senator  Ferguson.  Yes;  but  the  speed  is  much  lower  now  than  it 
had  been  in  previous  years,  when  you  are  comparing  cotton  to  rayon. 

Mr.  Whitney.  The  speed  is  less,  sir  ? 

Senator  Ferguson.  Isn't  it,  on  busses?  Isn't  there  a  limit  on 
busses  ? 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8535 

Mr.  Whitney.  In  the  intercity  bus  lines,  as  I  understand  it,  their 
schedules  are  being  maintained  and  I  ran  from — I  have  made  three 
or  four  trips  during  the  past  summer  on  intercity  busses  and  they  go 
just  as  fast  as  usual. 

Senator  Ferguson.  Did  you  get  the  speeds  in  these  tests  when  you 
talked  about  the  fatal  accidents  in  cotton  and  the  lack  of  accidents  in 
rayon,  did  you  consider  the  speed? 

Mr.  Whitney.  Yes,  sir;  the  speeds  of  the  bus  operators;  they 
told  me  personally  in  conversation  that  their  speeds  were  lower  with 
cotton  cords  and  they  wouldn't  dare  run  at  the  same  speeds  that  they 
run  with  rayon  cords;  they  were  very  definite  about  that,  and  they 
have  all  stated,  at  least  several  of  them  have  stated,  that  they  would 
have  to  reduce  if  they  had  to  use  cotton  cords  on  their  busses,  even 
with  natural  rubber  that  they  would  have  to  reduce  their  load  by  30 
percent.  In  other  words,  take  only  the  seated  passengers,  no  standing 
passengers.  Now  these  seem  to  be  to  me  quite  concrete,  definite 
engineering  facts,  so  I  was  really  very  curious  to  know  what  some  of 
the  fundamental  reasons  were  for  these  things,  what  was  the  difference 
between  cotton  and  rayon,  what  was  the  difference  between  synthetic 
rubber  and  the  natural  rubber,  so  I  got  technicians  of  four  of  the  large 
and  four  of  the  small  tire  companies  to  assemble  for  me,  all  of  their 
laboratory  data,  technical  data. 

I  want  to  cite  you  just  a  few  things,  and  you  will  see  what  the  prob- 
lem is.  Now  the  thicker  the  tire  the  hotter  it  runs.  This  is  true 
irrespective  of  how  the  tire  is  made  or  what  type  of  rubber  or  cord 
construction  is  used.  Now  that  is  relative.  I  mean  if  it  is  made  of 
one  construction  it  is  that  much  thicker  and  it  is  going  to  run  pro- 
portionately hotter  all  the  way  through,  irrespective  of  how  you  make 
it.  The  temperature  of  a  tire  when  operating  at  40  miles  per  hour 
increases  5  degrees  Fahrenheit  per  .03"  (^  of  an  inch)  of  thickness; 
accordingly  a  7.50  20/10-ply  cotton  cord  tire,  which  is  1.315"  thick, 
will  run  28  degrees  hotter  than  an  8-ply  rayon  cord  tire,  which  is 
1.147  inches  thick.  Those  are  just  plain  facts  that  you  can't  get  away 
from.  Tires  of  the  same  thickness,  constructed  with  the  same  gauge 
of  cord,  cotton  or  rayon;  but  made  of  G.  R.  S.  synthetic  compounds 
will  run  under  normal  operating  conditions,  that  is  from  25  to  45  miles 
an  hour,  30  to  50  degrees  hotter  than  tires  made  of  natural  crude  rub- 
ber. 

From  such  information  as  I  have  been  able  to  obtain 

Senator  Stewart  (interposing).  I  didn't  get  that  last  statement. 

Mr.  Whitney.  Thirty  to  50  degrees  hotter,  a  synthetic  rubber  tire 
runs  30  to  50  degrees  hotter.;  that  is  the  70  to  90  percent  synthetic  rub- 
ber tire  runs  30  to  50  degrees  hotter  than  a  natural  rubber  tire. 

Senator  Stewart.  At  what  speed? 

Mr.  Whitney.  Twenty-five  to  45  miles  an  hour. 

Senator  Stewart.  Even  though  it  has  rayon  cord  in  it  ? 

Mr.  Whitney.  Irrespective.  Now  this  is  point  one ;  it  runs  hotter 
if  it  is  thicker ;  point  two,  if  it  is  made  of  synthetic  compounds  it  runs 
hotter  than  if  it  is  made  of  natural  rubber. 

Senator  Stewart.  Is  that  true,  regardless  of  what  sort  of  cord  is 
in  the  make-up  of  the  tire  ? 

Mr.  Whitney.  Yes,  sir ;  yes,  sir. 

Senator  Stewart.  Does  it  run  any  hotter  with  cotton  cord  than 
with  rayon  cord? 


8536     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

Mr.  Whitney.  It  does,  sir. 

Senator  Stewart.  What  would  be  the  difference? 

Mr.  Whitney.  Tires  made  with  cotton  cord  construction  run  hotter 
than  tires  made  of  rayon  cord  construction. 

Senator  Stewart.  How  much  ? 

Mr.  Whitney.  Even  though  the  rubber  content  and  size 

Senator  Ferguson.  How  much? 

Mr.  Whitney.  Ten  degrees. 

Senator  Stewart.  That  would  be  40°  hotter,  then? 

Mr.  Whitney.  If  you  add  all  of  these  ? 

Senator  Stewart.  I  mean  merely  adding  10  to  30  would  mean  40° 
hotter. 

Mr.  Whitney.  If  we  take  these  figures  on  a  7.50/20  size  only,  10- 
ply  cotton,  versus  8-ply  rayon,  you  start  out  with  28°  hotter,  then,  we 
will  say,  for  this  size,  and  this  is  for  convoy  trucks  run  at  high  speed ; 
we  say  40°,  they  will  run  40°  hotter.  That  would  be  68°.  Then  if  we 
have  rayon  cord  it  will  run  still  10°  hotter  than  rayon,  and  there  is 
78°  difference  in  the  running  temperature  of  those  two  tires,  and  that 
is  what  happens. 

Senator  Bankhead.  Are  you  using  figures  you  got  from  the  U.  S. 
Rubber  Co.? 

Mr.  Whitney.  No,  sir ;  these  are  made  by  all  the  laboratories,  com- 
piled and  collected  together,  and  I  have  gone  over  them  all  very  care- 
fully with  them  the  tire  company  technologists  and  I  believe  that  they 
are  as  accurate  and  honestly  gotten  up  and  compiled  as  any  figures  I 
have  worked  with.  Now  rayon  cord  retains  its  tensile  strength  better 
than  cotton  cord  at  elevated  running  temperatures.  A  great  number  of 
independent  laboratory  tests  show  this  to  be  true.  In  this  respe^  t, 
rayon  cord  is  somewhat  analogous  to  spring  steel  versus  soft  steel.  In 
other  words,  spring  steel,  which  has  no  elongation  or  reduction  of 
area,  or  very  small,  will  stand  a  reversal  of  stress  a  great  many  times, 
whereas  the  soft  steel,  which  has  high  elongation,  will  only  stand  a  re- 
versal of  stress  a  few  times. 

Finally,  the  physical  properties  of  rayon  strands  are  much  more 
uniform  than  cotton ;  they  are  from  two  to  three  times  more  uniform 
and  building  cotton  cord  for  a  tire  is  like  building  cable  or  a  suspen- 
sion bridge ;  you  must  have  every  strand  in  that  cable  of  uniform  prop- 
erties, as  nearly  as  possible  or  you  get  failures  like  the  Jamestown  and 
Detroit  bridges,  and  here  with  this  rayon,  science  has  taken  nature's 
fibers,  either  cotton  or  wood,  and  made  a  uniform  viscous  fiber,  elimi- 
nating all  the  natural  defects  of  nature  in  cotton,  and  this  uniformity  is 
two  to  three  times  greater.    Uniformity  explains  a  great  deal. 

I  bring  these  things  out  to  explain  the  fundamental  reasons  why 
rayon  is  superior  to  cotton :  its  greater  resistance  to  repeated  flexing  at 
high  temperatures,  and  its  great  uniformity  of  structure.  Now  you 
would  expect  the  results  from  these  tests  to  be  about  the  same  as  the 
laboratory  tests.  You  wanted  me  to  get  to  these  tests,  Mr.  Halley, 
these  more  recent  tests. 

Mr.  Halley.  I  think  Senator  Truman  asked  you  to  do  that. 

The  Chairman.  I  was  anxious  to  get  the  results  of  those  most 
recent  tests. 

Mr.  Whitney.  Mr.  Senator,  these  last  three  tests  were  run  pri- 
marily to  determine  how  they  would  make  the  best  cotton  cord  tire 
in  the  7.50-20  and  9.00-16  sizes.    844  cotton  cord  tires  and  241  rayon 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8537 

cord  tires  were  involved  in  these  tests.    There  were  the  8-ply  cotton,  8- 
ply  cotton  with  2  cap  plies. 

Senator  Stewart.  What? 

Mr.  Whitney.  Two  cap  plies,  just  over  the  top,  the  plies  don't ' 
go  down  in  the  bead ;  and  8-ply  rayon.  This  is  dated  20th  of  Sep- 
tember and  is  a  compilation.  I  went  over  these  up-to-date  compila- 
tions last  night  and  checked  a  lot  of  these  figures  and  they  are  quite 
correct  and  they  show,  giving  8-ply  cotton,  using  it  as  100  percent  on 
the  military  course  at  Normoyle,  cotton  8-ply  and  2  cap  plies,  116  per- 
cent; cotton  10-ply,  142  percent;  rayon  8-ply,  155  percent.  You  get 
that  much  more  service  out  of  them. 

Senator  Stewart.  Are  you  talking  about  the  heat  test  or  impact 
test? 

Mr.  Whitney.  That  is  the  military  service  test  at  Normoyle  over 
hot  roads,  rocks,  everything. 

Senator  Stewart.  I  thought  Normoyle  was  the  field  where  the 
test  was  made  for  impact? 

Mr.  Whitney.  That  is  right,  El  Centro,  Calif.,  for  the  tests  over  the 
hot  roads. 

Senator  Stewart.  El  Centro  is  in  the  desert ;  that  would  naturally 
be  the  heat  test. 

Mr.  Whitney.  Yes,  sir.  Now  there  the  8-ply  cotton,  is  100,  8-ply 
cotton  plus  2  cap  plies,  still  only  100  because  the  thicker  the  tire  with 
the  heat  the  more  trouble  they  have. 

Senator  Stewart.  Now  you  are  reading,  then,  from  the  tests  at 
Normoyle,  Tex? 

Mr.  Whitney.  Normoyle,  8-ply  cotton,  100;  8-ply  cotton  with  2 
cap  plies,  116.  Cotton  10-ply,  142;  rayon  8-ply,  155.  Now  we  will 
go  to  El  Centro,  the  heat  course  in  the  desert.  Cotton,  8-ply,  100; 
cotton  8-ply  plus  2  cap  plies,  still  100;  cotton,  10-ply,  110;  rayon 
8-ply,  124.  Now  one  case  is  25,  the  other  26  percent,  better ;  24,  26,  av- 
erage of  25' percent  over-all  improvement  on  the  rayon  would  mean 
that  if  we  had  rayon  available,  or  a  cotton  cord  as  good  as  rayon  to 
make  these  tires  8-ply,  we  would  have  to  make  25  percent  less  tires. 

Senator  Ferguson.  Mr.  Whitney,  does  it  take  more  natural  rubber 
to  make  a  tire  with  cotton  cord,  or  with  rayon,  or  is  there  any  differ- 
ence? 

Mr.  Whitney.  It  does,  sir;  it  takes  about  a  little  more  than  10, 
about  15  percent,  more. 

Senator  Ferguson.  What  about  synthetic? 

Mr.  Whitney.  The  same  thing  is  true,  but  the  proportion  of  nat- 
ural rubber  to  synthetic  rubber  used  in  tires  on  small  trucks  and  pas- 
senger cars,  the  percentage  of  natural  rubber  is  3  percent  of  the  total 
rubber  used  in  the  construction  of  the  passenger-car  tires. 

Senator  Ferguson.  Now,  was  it  the  same  percentage  in  the  rayon 
cords  as  in  the  cotton  cords  on  these  tests  ? 

Mr.  Whitney.  Yes,  sir ;  relatively  the  same,  yes ;  but  there  were  a 
great  many  different  makes  here  in  these  tests.  There  is  an  average. 
One  very,  very  interesting  thing  to  me  in  this  last  test  is  that  here 
was  a  certain  tire  maker  who  telegraphed  you  or  us  when  this  con- 
troversy was  up  about  a  year  ago.  He  telegraphed  on  August  31, 
1942,  this : 

We  suggest  that  you  consider  the  necessity  for  increased  rayon  production  in 
light  of  very  favorable  results  on  low-gage  cotton  cord  which  will  equal  and 
311932— 44— pt.  21 3 


8538     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

even  better  rubber-saving  possible  by  use  of  rayon  cord  whicb  bas  proven  its 
performance  under  Army  tests  in  Texas.  Strategic  materials  for  increased 
rayon  production  as  well  as  equipment  for  treating  rayon  in  tire  plants  not 
warranted  till  tests  now  running  and  those  ready  for  test  by  the  major  companies 
in  the  industry  are  completed. 

Results  of  tests  already  made  by  the  Army  with  low-gage  cotton  cord  and 
that  which  is  now  in  progress  by  the  major  companies,  etc., — 

and  ends  up  with — 

Within  the  next  few  months  low-gage  cotton  cord  will  have  proven  its  facility 
and  provide  both  rubber-saving  either  of  crude  or  synthetic  and  performance 
of  both  obviating  the  necessity  for  rayon  production  increase. 

(The  telegram  referred  to  was  marked  "Exhibit  No.  905"  and  is 
included  in  the  appendix  on  p.  8899.) 

Mr.  Whitney.  That  same  company  in  a  recent  test 

Senator  Ferguson.  Who  signed  the  telegram  ? 

Mr.  Whitney.  I  would  rather  not  give  the  company's  name,  sir. 
That  same  company,  their  rayon  8-ply  tires  (they  preferred  to  make 
the  same  thickness,  and  made  them  with  2-cap  plys)  versus  their  two 
best  types  of  cotton ;  their  rayons  run  from  two  to  three  hundred  per- 
cent better  than  their  cotton  tires  which  they  stated  a  year  ago  were 
going  to  be  better. 

Senator  Ferguson.  Now,  you  are  talking  about  the  last  ? 

Mr.  Whitney.  That  is  the  last  test.    This  test  started  in  August. 

The  Chairman.  For  the  benefit 

Mr.  Whitney.  Within  the  last  3  months. 

The  Chairman.  For  the  benefit  of  the  committee  and  off  the  record, 
tell  us  the  name  of  that  company. 

Mr.  Whitney.   (Off  the  record.) 

Mr.  Halley.  With  respect  to  the  time  element,  with  respect  to  this 
last  test,  is  it  not  a  fact  that  as  of  the  time  when  this  committee 
submitted  its  report  on  the  subject  to  the  Senate  that  there  were  no 
cotton  tires  being  run  in  the  larger-size  tests  ? 

Mr.  Whitney.  Oh,  no,  sir. 

Mr.  Halley.  In  the  larger  tires  ? 

Mr.  Whitney.  In  9.00  20's  the  industry  and  rubber  director's  tests 
were  running  9.00  20's. 

Mr.  Halley.  They  were  subsequent  to  the  committee's  report ;  were 
they  not? 

Mr.  Whitney.  Yes,  sir. 

Mr.  Halley.  But  as  of  the  test  being  run  by  the  Government  at  the 
time  this  committee  submitted  its  report  ? 

Mr.  Whitney.  I  think  you  are  quite  right.  I  don't  think  there 
were  any ;  they  were  experimenting  and  building  tires. 

Mr.  Halley.  Just  were  not  testing  cotton  in  the  larger  sizes? 

Mr.  Whitney.  Just  trying  to  find  out  how  to  build  a  tire. 

Mr.  Halley.  And  then  when  they  went  into  the  tests  to  which  you 
now  refer 

Mr.  Whitney.  They  did — now  the  industry  and  Government  at 
both  Phoenix  and  San  Antonio  have  their  resuits  right  up  to  Septem- 
ber 20,  which  I  am  submitting  to  you  here,  and  from  those  tests  it 
would  look  as  though  the  best  synthetic  rubber  tire  that  we  can  build, 
using  a  rayon  cord,  will  only  last  half  as  long  as  a  natural  rubber  tire ; 
the  best  tire  we  can  build  with  cotton  will  only  last  less  than  one-fourth 
as  long,  as  natural  rubber  with  rayon. 


INVESTIGATION'   OF   THE    NATIONAL    DEFENSE   PROGRAM     8539 

Mr.  Halley.  And  again  this  is  the  result  of  recent  tests  ? 

Mr.  Whitney.  These  are  all  recent  tests,  conducted  within  the  last 
3  to  4  months. 

Mr.  Halley.  And  these  tests,  like  your  own  report,  were  undertaken 
as  a  result  of  this  committee's  statement  that  up  to  the  time  of  its 
report  no  tests  had  been  made  which  would  be  of  a  conclusive  nature  ? 

Mr.  Whitney.  I  feel  that — yes,  definitely.  There  were  too  many 
variables,  there  were  too  many  types  of  rubber,  too  many  types  of 
construction.  Now  they  are  getting  them  boiled  down  to — the  tire 
companies  are  really  working  together,  everything  that  one  discovers 
is  given  to  the  others  and  the  very  best  method  of  mixing  the  rubber, 
applying  it  to  the  tire,  the  best  place  to  use  the  natural  rubber,  the 
best  place  to  use  the  synthetic  rubber,  I  believe  will  be  determined  and 
I  think  we  are  going  to  have  the  best  synthetic  tire  in  the  world.  I 
don't  think  there  is  any  question  about  it. 

Mr.  Halley.  And  is  it  your  opinion  that  these  recent  tests  are  of 
the  standard  of  a  type  that  this  committee  asked  be  made  in  its  report  ? 3 

Mr.  Whitney.  I  do,  sir,  I  do ;  and  I  am  firmly  of  the  opinion  that 
rayon  must  be  used  in  all  aircraft  tires  to  save  weight  alone,  and  to 
avoid  blow-outs ;  must  use  it  in  fuel  cells,  and  we  must  use  it  in  tires 
8.00-25  10-ply  and  larger,  for  heavy  duty  on  the  civilian  bus  and  truck 
inter-city  work,  or  for  the  Army.  In  the  intermediate  and  smaller 
tires  there  is  no  possibility  of  rayon  being  available  for  them ;  we  are 
going  to  make  them  out  of  the  best  cotton  we  can ;  United  States  Rub- 
ber Co.  is  working  on  cotton  and  it  is  interesting  to  note  that  U.  S. 
Rubber  Co.  has  made  consistently  the  best  cotton  cord  tire  of  any 
company  of  which  I  know,  looking  over  these  tests. 

Mr.  Halley.  Those  cotton  cord  tires  on  the  intermediate  size  tires 
will  be  perfectly  satisfactory  tires,  will  they  not  ? 

Mr.  Whitney.  I  think  they  will  be  satisfactory.  Now  it  comes  down 
to  a  question  of  tire  making  equipment  and  of  man-hours.  If  we 
make  a  10-ply,  7.50-20, 10-ply,  we  would  have  to  groove  out  all  of  our 
existing  molds,  and  because  it  takes  about  20  percent  longer  to  build 
them  we  would  have  to  have  20  percent  more  molds  than  if  we  could 
build  them  8-ply.  We  can  use  the  same  mold  for  the  8-ply,  plus  the 
2-cap  plys,  and  that  is  why  we  are  going  into  that  construction. 

Mr.  Halley.  And  we  will  get  a  tire  you  feel  will  serve  the  armed 
services  well  ? 

Mr.  Whitney.  I  do. 

Mr.  Halley.  Made  of  cotton  in  the  intermediate  sizes  ? 

Mr.  Whitney.  I  do,  and  I  am  in  high  hopes  that  either  mercerized 
or  a  new  process  of  U.  S.  Rubber  is  going  to  improve  the  cotton 
cord,  and  I  hope  we  are  going  to  get  a  cotton  cord  that  will  make  these 
8-ply,  because  I  know  they  are  going  to  be  better  with  8-ply  than  they 
would  be  if  they  were  not. 

Senator  Connally.  About  the  time  the  committee  made  this  report, 
based  on  these  Army  tests,  you  said  this  Captain  Robson  was  very  fine ; 
you  know  him ;  a  very  fine  gentleman  ? 

Mr.  Whitney.  I  like  him. 

Senator  Connally.  Knows  his  business,  does  he  ? 

Mr.  Whitney.  I  think  he  does,  sir. 

1  Senate  Report  No.  10,  Part  11;  7Sth  Cong.,  1st  Sess. 


8540     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

Senator  Connally.  Now  at  that  time  he  made  the  report  that  so 
far  as  the  natural  rubber  was  concerned,  the  standard  gage  tire  made 
from  cotton  was  superior  to  that  made  with  the  rayon ;  is  that  true  ? 

Mr.  Whitney.  His  tests  showed  that,  sir. 

Senator  Connally.  Did  he  make  other  tests  later  on — much  later  on  ? 

Mr.  Whitney.  No,  sir. 

Senator  Connally.  So  far  as  the  record  goes,  this  test  is  the  final 
test  that  Captain  Robson  made? 

Mr.  Whitney.  That  is  the  only  one  they  made  on  natural  rubber. 

Senator  Connally.  Natural  rubber,  and 

Mr.  Whitney.  Rayon  versus  cotton. 

Senator  Connally.  So  that  so  far  as  we  know  here  officially,  the 
last  test  made  as  to  these  tires  was  that  cotton  was  superior;  is  that 
right  ? 

Mr.  Whitney.  Yes,  sir ;  that  was  on  a  comparatively  small  number 
of  tires,  and  when  you  take  it  literally 

Senator  Connally.  The  Army  was  doing  it;  it  was  an  official  test, 
wasn't  it? 

Mr.  Whitney.  It  was  an  official  test  to  give  them  a  trend,  to  give 
them  a  trend  how  should  they  move,  what  should  they  do. 

Senator  Connally.  What? 

Mr.  Whitney.  It  was  to  give  them  a  trend,  what  should  they  do, 
how  should  they  move. 

Senator  Connally.  Those  were  tests  and  they  gave  them  a  test,  and 
the  result  was  cotton  was  superior ;  isn't  that  right  ? 

Mr.  Whitney.  In  that  test ;  yes,  sir. 

Senator  Connally.  All  right,  that  test  wasn't  satisfactory.  Then 
you  had  to  make  another  one ;  is  that  right  ? 

Mr.  Whitney.  No,  sir,  didn't  make  any  more  tests. 

Senator  Connally.  The  Army  didn't  make  any  additional  tests? 

Mr.  Whitney.  No  object  in  making  any  additional  test. 

Senator  Connally.  So  far  as  it  goes  here  the  last  test  was  that  cot- 
ton was  superior;  is  that  right? 

Mr.  Whitney.  In  natural  rubber  in  that  particular  test. 

Senator  Connally.  Now  in  the  matter  of  these  investments — 45,000,- 
000  for  new  facilities  for  rayon — you  say  there  are  no  additional  fac- 
ilities planned  for  the  making  of  cotton  cord? 

Mr.  Whitney.  Yes,  sir;  we  have  to  provide  additional  twisting 
facilities  and  quite  a  few  additional  facilities  for  cotton. 

Senator  Connally.  That  will  be  a  simple  matter  we  ought  to  be  able 
to  do? 

Mr.  Whitney.  Yes,  sir. 

Senator  Connally.  Without  any  great  outlay.  How  much  is 
planned  for  that?     How  much  Government  money  is  planned? 

Mr.  Whitney.  I  don't  know  the  total  cost,  sir. 

Senator  Connally.     What? 

Mr.  Whitney.  I  don't  know  the  total  cost. 

Senator  Connally.  What  companies  were  the  ones  that  were  going 
to  get  that  money?     Do  you  know? 

Mr.  Whitney.  I  don't  know  that. 

Senator  Connally.  You  seem  to  know  pretty  well  the  names  of  these 
rayon  people.     How  about  the  cotton  folks  ? . 

Mr.  Whitney.  The  cotton  folks,  the  mills  ? 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8541 

Senator  Connally.  Do  you  know  them,  too  ? 

Mr.  Whitney.  Yes,  sir. 

Senator  Connally.  What  are  they  ? 

Mr.  Whitney.  Well,  the  biggest  producers. 

Senator  Connally.  The  ones  that  are  going  to  get  these  additional 
facilities  now  of  Government  money,  the  cotton  people. 

Mr.  Whitney.  I  don't  know  which  mills  they  are  going  into ;  into 
the  tire  cord  mills  where  they  twist  tire  cord,  of  course. 

Senator  Maybank.  I  was  going  to  ask  the  gentleman  familiar  with 
statistics  a  certain  question  that  had  nothing  to  do  with  cotton.  You 
stated  awhile  ago  about  the  manpower  shortage  in  Georgia  and  the 
necessity  to  build  homes. 

Mr.  Jacobson.  That  is  generally  true  throughout  the  United  States. 

Senator  Maybank.  Are  you  familiar  with  the  War  Manpower 
Commission's  report  by  Commissioner  McNutt  ? 

Mr.  Jacobson.  I  am  not,  sir. 

Senator  Maybank.  Well,  I  wish  you  would  look  into  it,  for  this  rea- 
son, and  for  the  war  effort  solely.  He  says  there,  and  I  have  told  Mr. 
Nelson  on  innumerable  occasions,  there  is  quite  a  surplus  in  the  Pied- 
mont section  of  South  Carolina  where  the  largest  textile  mills  are, 
and  there  has  never  been  any  effort  made  to  utilize  the  surplus  labor 
there.  ,  I  have  complained  on  several  occasions  and  put  a  piece  in  the 
Congressional  Record,  and  as  I  understand  it  the  Defense  Plant  Cor- 
poration allots  out  these  improvements  and  you  gentlemen  tell  them 
where  to  go. 

Mr.  Jacobson.  That  is  precisely  the  information  we  want.  I  sat  in 
on  a  meeting  of  the  8  or  10  or  12  cotton-cord  manufacturers,  and  each 
one  of  them  there  was  saying  they  wish  they  only  had  some  more  labor, 
that  we  could  turn  out  more,  and  if  we  can  find  it,  it  will  be  swell. 

Senator  Maybank.  I  may  say  it  is  the  largest  cotton  manufacturing 
section  of  this  country,  in  North  and  South  Carolina,  right  there 
together,  and  South  Carolina  is  a  little  larger,  and  you  can  see  the 
report  in  which  Mr.  McNutt  stated  that  in  that  section  there  was  a 
surplus  of  labor,  and  you  can  find  the  report;  it  is  skilled  labor.  I 
thought  it  might  help  the  effort. 

Mr.  Jacobson.  Thank  you,  very  much. 

Senator  Maybank.  It  is  in  Greenville,  S.  C,  and  Spartanville 
section. 

Mr.  Jacobson.  Could  I  say  one  general  thing  that  I  think  is  war- 
ranted at  this  stage  ?  The  interest  which  your  committee  has  focused 
on  this  entire  problem  has,  we  have  felt,  added  greatly  to  the  amount 
of  knowledge  that  the  industry  and  the  Government  has  on  use  of 
cotton  and  rayon  cord,  and  out  of  it  we  should  get  an  appreciably 
better  tire  than  we  had  before.  I  sincerely  believe  that  that  is  the 
truth — the  amount  of  research  and  development  work  that  you  people 
have  focused  or  fostered  as  a  result  of  your  interest  in  this  has  been 
tremendous.     We  ought  to  have  better  tires  as  a  result. 

Mr.  Whitney.  I  am  sure  of  it. 

The  Chairman.  Mr.  Whitney,  you  don't  think  it  would  be  proper 
or  safe  to  put  this  complete  report  of  yours  in  the  record  ? 

Mr.  Whitney.  Well,  I  don't  think  so  because  all  those  technical 
details  are  there  about  fuel  cells. 

The  Chairman.  Could  you  eliminate  the  part  that  might  be  useful 
to  the  enemy  and  put  in  the  balance  ? 


8542     INVESTIGATION"   OF   THE    NATIONAL   DEFENSE   PROGRAM 

Mr.  Whitney.  Yes,  sir ;  I  would  be  glad  to  do  that. 

The  Chairman.  Will  you  do  that  ? 

(The  report  referred  to  was  marked  "Exhibit  No.  906"  and  is  in- 
cluded in  the  appendix  on  pp.  8900-8937.) 

Mr.  Whitney.  You  have  a  copy  of  this  telegram ;  I  showed  it  to  you 
at  luncheon  the  other  day.  That  is  from  the  tire  companies,  all  sup- 
porting who  had  before  been  against ;  you  remember  testified  a  year  ago 
very  much  against  rayon  ? 

The  Chairman.  I  will  put  this  in  the  record. 

(The  telegram  referred  to  was  marked  "Exhibit  No.  907"  and  is 
included  in  the  appendix  on  p.  8937.) 

Mr.  Fulton.  The  test  which  turned  out  to  have  been  at  least  equal 
for  cotton,  according  to  the  Army  test,  5  percent  superior,  I  was  quite 
interested  in  the  question  as  to  whether  you  could  yet  make  synthetic- 
rubber  tires  which  do  have  the  mileage  of  the  natural-rubber  tire  in 
these  big  sizes.     I  understand  you  cannot. 

Mr.  Whitney.  Not  yet,  sir.     The  best  one  is  half  as  good. 

Mr.  Fulton.  Now,  the  reason  that  I  say  that  is  that  you  use  30  per- 
cent of  natural  rubber  in  the  synthetic  tire  ? 

Mr.  Whitney.  In  the  big  ones. 

Mr.  Fulton.  Yes. 

Mr.  Whitney.  That  is  correct,  sir. 

Mr.  Fulton.  So  that  with  the  present  mileage  you  are  getting  out 
of  your  synthetic  tires  you  really  are  using  about  as  much  natural  rub- 
ber by  making  more  tires  as  you  would  if  you  made  natural  rubber  tires 
and  got  the  greater  mileage,  but  you  hope  through  these  experiments 
that  are  going  on  to  learn  how  to  make  them,  and  do  that  rather  shortly, 
a  good  synthetic  tire  ? 

Mr.  Whitney.  We  do. 

Mr.  Fulton.  The  fact  is  that  today,  whether  you  are  talking  about 
rayon  tires  or  cotton  tires,  in  the  synthetic,  we  don't  really  yet  know, 
even  our  best  companies,  how  to  make  the  best  tires  out  of  synthetic 
rubber  ? 

Mr.  Whitney.  I  don't  think  so.  Some  of  these  have  gone  16,000 
miles. 

Mr.  Fulton.  That  is  the  conclusion  I  was  merely  trying  to  find  on 
that,  that  we  really  have  to  do  a  lot  more  than  these  so-called  synthetic 
tests ;  we  have  to  go  in  and  make  tires  and  find  out  how  they  work,  and 
the  final  judgment  on  this  will  be  what  happens  in  the  next  2  years, 
rather  than  what  has  happened  to  date. 

Mr.  Whitney.  Yes,  sir. 

Mr.  Fulton.  And  the  tests  made  before  the  committee's  report  were 
merely  other  tests  and  you  couldn't  draw  any  conclusion  ? 

Mr.  Whitney.  Nothing  but  a  trend. 

Mr.  Fulton.  And  even  on  that,  when  you  look  at  the  variables,  they 
had  so  many  variables  in  there  that  the  tests  were,  so  to  speak,  worth- 
less— some  of  those  tests  ? 

Mr.  Whitney.  But  they  learned  an  awful  lot ;  they  weren't  worthless 
because  they  learned  how  to  build  tires. 

Mr.  Fulton.  But  they  were  worthless  as  far  as  determining  whether 
they  showed  superiority  or  inferiority  because  they  had  variables  other 
than  cord? 

Mr.  Whitney.  That  is  true,  but  if  you  take  the  average  of  averages, 
it  gives  you  a  trend,  and  you  can't  get  away  from  it. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8543 

Mr.  Fulton.  That  trend  has  been  one  established  more  recently  in 
the  more  recent  tests? 

Mr.  Whitney.  Yes,  and  the  tires  are  better  with  both  cotton  and 
rayon,  with  synthetic,  they  are  getting  better  all  the  time,  and  I  want 
to  echo  what  Mr.  Jacobson  said :  As  a  result  of  your  interest  a  great 
deal  of  advancement  has  taken  place. 

The  Chairman.  The  committee  will  stand  recessed  until  called  by 
the  chairman. 

(Whereupon,  at  12: 15  p.  m.,  the  committee  recessed.) 


INVESTIGATION  OF  NATIONAL  DEFENSE  PEOGEAM 


THURSDAY,   OCTOBER   28,    1943 

United  States  Senate, 
Special  Committee  Investigating 

the  National  Defense  Program, 

Washington,  D.  C. 

The  committee  met  at  10:40  a.  m.,  pursuant  to  the  call  of  the 
chairman,  in  room  318,  Senate  Office  Building,  Washington,  D.  C, 
Senator  Harry  S.  Truman,  presiding. 

Present:  Senators  Harry  S.  Truman  (chairman),  Tom  Connally, 
Mon  C.  Wallgren,  Homer  Ferguson,  Joseph  H.  Ball,  and  Carl  A. 
Hatch. 

Present  also:  Senator  Scott  W.  Lucas,  Illinois;  Representative 
Hatton  W.  Sumners,  Texas;  and  Hugh  Fulton,  chief  counsel  to  the 
committee. 

The  Chairman.  The  committee  will  come  to  order.  I  want  to  read 
a  short  statement  for  the  record  before  we  start.  For  more  than  a 
year  the  committee  has  been  concerned  at  the  lack  of  efficiency  in  the 
utilization  of  employees  in  the  aircraft  plants,  as  well  as  in  shipping 
and  certain  other  war  industries.  Some  inefficiency  must  be  expected, 
but  as  time  passes  these  war  industries  should  become  more  efficient. 

With  the  increasing  severity  of  the  manpower  shortage  and  the 
increases  in  the  size  of  the  armed  services,  we  were  faced  with  a 
choice  of  forcing  more  efficiency  into  our  primary  war  industries  or 
having  to  cut  back  or  cancel  programs  for  the  construction  of  desir- 
able but  less  necessary  war  goods  and  essential  civilian  goods.  For 
these  reasons,  the  committee  has  privately  been  insisting  that  many 
plants  turn  in  a  better  record  and  has  been  alarmed  at  the  tendency 
of  the  procurement  agencies  to  assume  that  inefficiency  was  a  neces- 
sary evil,  and  that  the  only  way  to  treat  the  matter  was  to  declare 
various  cities  to  be  critical  labor  areas  and  prevent  the  issuance  of 
further  contracts  in  such  areas. 

Dallas,  Tex.,  presents  a  typical  situation  in  which  the  area  was  de- 
clared to  be  critical,  solely  because  the  North  American  Aviation 
plant  near  Dallas  said  it  would  require  many  thousands  of  additional 
employees.  The  committee  conducted  a  private  investigation  at 
Dallas  through  its  subcommittee  on  aviation,  which  took  more  than 
a  thousand  pages  of  testimony  from  approximately  250  witnesses, 
and  turned  the  record  over  to  Mr.  Charles  E.  Wilson,  Vice  Chair- 
man of  the  War  Production  Board  and  rightly  regarded  as  one  of 
the  Nation's  foremost  production  experts. 

Mr.  Wilson  has  informed  the  committee  that  the  estimated  man- 
power requirements  of  the  North  American  Aviation  plant  at  Dallas 
had  been  reduced  by  approximately  10,000  workers  and  that  as  a  con- 

8545 


8546     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

sequence  it  will  need  to  hire  only  a  minimum  of  new  employees  until 
January  1944,  principally  for  replacements.  He  has  also  stated  that 
even  after  that  time  the  build-up  to  the  ultimate  stabilized  manpower 
load  in  the  North  American  Aviation  plant  will  be  on  a  gradual  scale 
based  on  new  schedules,  and  that  he  has  informed  Mr.  Paul  McNutt, 
Chairman  of  the  War  Manpower  Commission,  of  these  conclusions,  be- 
cause, and  I  quote  Mr.  Wilson,  of  the  "effect  of  same  on  determination 
Dallas  as  No.  1  area  and  probability  War  Manpower  Commission 
may  desire  immediate  change  this  status." 

Governor,  go  ahead  and  discuss  this  situation  for  us. 

TESTIMONY  OP  PAUL  V.  McNUTT,  DIRECTOR,  WAR  MANPOWER 

COMMISSION 

DETERMINATION  OF  DALLAS,  TEX.,  AS  CRITICAL  LABOR  AREA  BY  W.  M.  C. 

Governor  McNutt.  I  came  to  answer  any  question  you  wish  to  put. 

The  Chairman.  Senator  Wallgren,  you  were  in  charge  of  the  sub- 
committee. 

Senator  Wallgren.  The  thing  that  bothers  me  in  the  whole  matter 
of  Dallas  is  how  did  you  determine  the  boundary  lines  for  your  critical 
area  in  Dallas  ?  The  reason  I  ask  that  question  is  the  plant  lies  between 
Dallas  and  Fort  Worth.  The  Tarrant  County  boundary  line  is  closer 
to  the  plant  than  it  is  to  Dallas.  A  great  many  of  these  workers  em- 
ployed at  the  Dallas  plant  live  outside  of  Dallas  County  and  over  in  the 
Fort  Worth-Tarrant  County  area.  How  did  you  arrive  at  those  bound- 
aries, because  all  over  the  United  States  today  men  are  driving  60 
miles  to  go  to  work  in  airplane  plants  and  these  people  who  live  just 
across  the  boundary,  the  county  line,  as  I  say,  great  numbers  of  them 
are  today  being  employed  in  this  Dallas  plant  of  North  American. 

Yet  you  leave  this  Tarrant  County  outside  of  the  critical  area  and 
you  put  Dallas  County  in  this  critical  area. 

Governor  McNutt,  The  determination  of  the  geographic  limits  of 
the  Dallas  labor  market  area  is  based  on  an  area  in  which  there  is  a 
concentration  of  labor  supply  available  to  the  center  or  closely  con- 
tiguous centers  of  industrial  activity,  and  although  more  than  80 
percent  of  the  population  of  Dallas  County  is  situated  in  the  city  of 
Dallas,  workers  in  all  parts  of  the  county  are  within  reasonable  com- 
muting distance  to  the  industrial  establishments  located  within  the 
city  and  nearby  towns. 

Senator  Wallgren.  Now  at  that  point  I  think,  without  going  any 
further,  I  would  like  to  ask  you  this  question.  Are  you  going  to  pay 
any  attention  to  Mr.  Wilson's  conclusions,  that  they  win  need  10,000 
less  men  than  at  first  anticipated  ? 

Governor  McNutt.  May  I  answer  your  question?  I  want  to  put 
this  all  on  the  record,  since  you  are  interested  in  having  the  reason  for 
the  designation  of  this  as  an  area.    May  I  complete  the  answer  ? 

Senator  Wallgren.  Surely. 

Governor  McNutt.  I  may  also  state,  and  I  will  put  the  telegram 
in  when  the  time  comes.  I  received  Mr.  Wilson's  telegram  at  8 :  32 
this  morning.1  I  don't  know  what  time  the  committee  received  the 
telegram. 


i  See  Exhibit  No.  908,  infra,  pp.  8553-8554. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8547 

The  Chairman.  About  the  same  time. 

Governor  McNutt.  Therefore  the  Dallas  labor  market  area  is  de- 
fined as  the  county  of  Dallas.  Within  this  county  there  are  several 
closely  situated  centers  of  industrial  activity  consisting  of  the  city 
of  Dallas,  Grand  Prairie,  Garland,  and  several  of  the  smaller  towns. 
Designations  of  boundaries  of  the  Dallas  labor  market  area,  as  well 
as  labor  market  areas  throughout  the  country,  are  made  by  the  State 
or  the  area  offices  of  the  War  Manpower  Commission,  subject  to  the 
approval  of  the  regional  and  headquarters  offices. 

Now,  as  you  have  pointed  out,  Senator,  in  close  proximity  to  the 
Dallas  labor  market  is  the  Fort  Worth  area,  another  center  of  ex- 
panding war  production  activity.  The  Fort  Worth  area  consists  of 
Tarrant  County  immediately  west  of  Dallas  County  and  small  por- 
tions of  Johnson,  Wise,  and  Parker  Counties.  These  two  areas,  until 
recently,  were  considered  as  one  labor  market  area.  The  distance 
between  the  principal  cities  of  Fort  Worth  and  Dallas  is  only  32 
miles. 

Because  of  the  nearness  of  the  two  cities  much  intermingling  of 
the  labor  supply  in  both  counties  had  taken  place.  During  the  last 
2  years,  however,  two  distinct  labor  market  areas  emerged,  due  pri- 
marily to  the  concentration  of  the  aircraft  industry  in  each  county. 
In  Dallas  County,  as  employment  increased  at  North  American  Cor- 
poration and  other  aircraft  companies,  labor  supply  tended  to  be 
drawn  to  these  concerns.  In  Tarrant  County  Consolidated  Vultee, 
situated  west  of  Fort  Worth,  became  the  principal  place  of  employ- 
ment, attracting  the  labor  supply  in  that  county. 

By  the  beginning  of  1943  the  region  10  office  of  the  War  Manpower 
Commission  reported  that  the  Dallas  area  was  not  providing  large 
numbers  of  workers  to  Fort  Worth,  and  also  that  the  Fort  Worth 
area  was  not  providing  large  numbers  of  workers  to  the  Dallas  labor 
market.  In  March  1943  the  two  areas  were  defined  and  were  classified 
separately.  While  some  intermingling  of  the  labor  supply  in  each 
county  still  takes  place,  the  extent  of  this  back  and  forth  commuta- 
tion of  workers  is  too  small  to  affect  the  estimates  of  available  labor 
supply  in  each  area. 

The  number  of  commuting  workers  from  each  county  probably 
offsets  the  other.  Now  there  is  a  secondary  Dallas  labor  market  area. 
In  region  10  of  the  War  Manpower  Commission  each  labor  market 
area  has  attached  to  it  an  area  designated  as  a  secondary  labor  market. 
This  development  arises  in  region  10  as  a  result  of  the  exceptionally 
great  distances  which  must  be  administered  by  the  U.  S.  Employment 
Service  of  the  War  Manpower  Commission.  On  the  whole,  labor 
market  areas  designated  as  secondary  consist  of  predominantly  agri- 
cultural communities.  For  example,  the  local  office  in  Dallas  is  ad- 
ministratively responsible  for  Employment  Service  operations  not 
only  in  Dallas  County  but  in  the  counties  of  Denton,  Kaufman,  and 
Rockwell. 

These  three  counties  make  up  the  secondary  labor  market  area  for 
the  Dallas  local  U.  S.  E.  S.  office  and  since  these  latter  counties  consist 
primarily  of  agricultural  activities,  their  labor  supply  is  not  con- 
sidered available  to  industrial  employers  in  the  county  of  Dallas. 
Now  this  is  particularly  true  since  the  passage  of  legislation  deferring 
large  numbers  of  farm  operators  and  hired  workers  on  the  basis  of 
their  continuing  availability  for  work  in  agriculture. 


8548     INVESTIGATION   OF   THE    NATIONAL    DEFENSE   PROGRAM 

Senator  Wallgren.  That  concludes  your  statement? 

Governor  McNtttt.  That  concludes  my  answer  to  your  question. 

Senator  Wallgken.  That  is  hardly  an  answer  because  we  still  don't 
know  why  you  choose  those  boundary  lines  of  Tarrant  County  and 
the  testimony  out  there  given  by  one  of  your  representatives  was 
to  the  effect  that  these  boundaries  had  been  arranged  during  the 
period  that  we  had  the  W.  P.  A.  and  areas  or  regions  were  set  up 
with  those  boundary  lines,  and  that  you  followed  the  same  boundary 
lines  at  that  time,  when  you  took  over,  and  used  those  same  boundary 
lines  to  determine  the  boundary  lines  of  critical  areas.  If  that  is  your 
reason,  it  still  doesn't,  to  my  way  of  thinking,  take  into  consideration 
all  the  available  labor  that  could  be  used  at  the  North  American 
plant. 

Governor  McNutt.  As  I  pointed  out,  in  March  of  this  year  they 
determined  there  was  very  little  intermingling  and  that  would  off- 
set  

Senator  Ferguson.  Could  you  give  us  the  figures  you  had  in  March 
of  this  year  to  determine — we  found  no  such  figures  in  your  office  in 
Dallas. 

Governor  McNutt.  Of  course  those  recommendations,  Senator,  are 
made  by  our  area  and  regional  offices. 

Senator  Ferguson.  I  assume  before  you  take  a  recommendation 
that  you  want  to  know  upon  what  the  recommendation  is  based,  so 
we  would  like  to  have  the  figures  of  last  March  upon  which  this 
division  was  made.  We  found  no  such  figures,  and  we  found  no  one 
in  your  office  with  knowledge  that  such  figures  existed.  In  fact,  we 
found  no  one  knowing  how  many  people  were  employed  in  the  North 
American  plant  that  lived  in  that  Fort  Worth  territory  or  Tarrant 
County.  We  found  no  one  knowing  what  came  out  of  the  Dallas 
district,  and  that  is  the  thing  that  I  think  prompted  the  Senator's 
question. 

Senator  Wallgren.  There  is  considerable  housing  just  across  the 
boundary  line,  and  those  people  are  being  employed  at  the  North 
American.  In  other  words,  it  appears  that  Dallas  is  being  charged 
up  with  everything  being  used  over  in  Tarrant  County,  as  well  as  the 
other  outlying  counties,  but  Tarrant  County  especially  is  outside  of 
your  critical  area. 

Governor  McNutt.  The  division  was  made  in  March  and  it  was 
made  upon  the  recommendation  of  our  local  office. 

Senator  Ferguson.  Did  you  have  any  figures  personally  at  that  time 
when  it  was  made  ? 

Governor  McNutt.  I  didn't  have  any  figures,  no,  of  course  not;  I 
will  take  the  recommendation  of  our  people  in  the  field  upon  whom  I 
depend  to  operate. 

Senator  Ferguson.  Don't  you  require  figures  to  come  in,  or  some 
data  to  come  in  with  these  recommendations,  seeing  whether  or  not 
in  your  judgment,  or  someone  superior  at  least  to  the  local  man,  that 
their  judgment  is  good? 

Governor  McNutt.  I  have  delegated  as  much  authority  as  I  know 
how  in  connection  with  the  War  Manpower  Commission  activities. 
We  are  dealing  with  a  series  of  local  problems.  I  want  to  give  the 
man  in  the  field  the  right  to  make  the  decision  and  get  the  job  done 
right  then. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8549 

Senator  Ferguson.  But  isn't  there  some  method  of  checking  whether 
or  not  his  decision  is  the  proper  decision  ? 

Governor  McNutt.  If  there  are  objections  to  it,  of  course  a  check 
is  made,  but  we  have  lots  of  these  areas. 

Senator  Ferguson.  Have  you  ever  had  any  objection  that  this  divi- 
sion down  here  of  Dallas  and  Fort  Worth  was  an  arbitrary  and  not 
a  reasonable  one  ? 

Governor  McNutt.  I  have  not,  sir.  Nothing  came  to  my  attention 
up  until  the  last  few  days,  but  this  was  done  in  March. 

LACK  OF  EFFICIENCY  IN  UTILIZATION  OF  MANPOWER  BY  NORTH  AMERICAN 

AVIATION,   INC. 

Senator  Ferguson.  Governor,  I  don't  think  you  answered  the  Sena- 
tor's question ;  at  least,  I  didn't  take  it  as  an  answer,  as  to  whether  or 
not  you  were  going  to  carry  out  the  suggestion  of  Mr.  Wilson. 

Governor  McNutt.  I  wasn't  given  an  opportunity ;  there  were  two> 
questions  put,  and  the  second  one  was  put  before  I  answered  the  first. 

Senator  Ferguson.  I  didn't  understand  this  was  an  answer  to  the 
first  one.    Could  you  answer  that  ? 

Senator  Wallgren.  The  reason  for  that,  Mr.  McNutt,  is  the  second 
question  is  the  most  important. 

Governor  McNutt.  And  that  is  what  you  are  after. 

Senator  Wallgren.  That  is  right,  and  Wilson  has  made  the  recom- 
mendation the  plant  be  cut  10,000  men.  Is  that  going  to  change  your 
opinion  ? 

Governor  McNutt.  Certainly  it  will  change  my  opinion.  Now  let 
me  answer  your  question.  This  classification  of  Dallas  is  group  1 
area.  It  was  made  on  October  1  on  the  basis  of  information  before  the 
War  Manpower  Commission  at  that  time.  This  information  amply 
justified  such  classification,  and  in  that  connection  it  is  not  only  from 
the  employers,  but  I  should  like  to  put  on  the  record  the  statement  of 
General  Meyers,  the  Deputy  Assistant  Chief  of  the  Air  Staff,  made  to 
John  Blandforcl,  in  which  he  sets  out  the  estimated  employment  that 
plants  A  and  B  of  North  American  make  as  follows :  As  of  the  end  of 
August,  30,000;  September,  34,500;  October,  39,000 ;  November,  43,500; 
December,  47,150 ;  thereafter,  47,150. 

Now  mind  you,  there  are  these  two  significant  paragraphs  in  this 
statement  of  General  Meyers.  The  employment  schedule  set  forth 
above  is  required  to  meet  the  airplane  schedules  for  these  plants. 
We  have  checked  these  figures  independently  on  the  basis  of  pro- 
duction indices  and  verified  that  this  employment  is  required  to  meet 
the  schedules  under  conditions  of  efficient  operation  and  labor  utiliza- 
tion. 

We  have  verified  that  this  employment  is  practical  and  suitable 
for  these  plants  according  to  the  methods  of  labor  utilization  now 
being  carried  on  there  and  being  proposed  for  future  operation. 

I  simply  wanted  to  put  that  in  the  record. 

Senator  Ferguson.  May  I  interrupt?  Who  is  responsible  in  the 
Government?  To  preface  this  question  I  want  to  use  the  chairman's 
statement.  I  think  that  is  one  of  the  most  important  statements 
that  has  been  issued  by  this  committee,  the  efficiency  in  the  produc- 
tion of  airplanes  particularly.     Now,  who  in  the  Government  is 


8550     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

responsible  for  looking  into  the  question  of  the  efficiency  of  labor 
in  the  plants  in  these  respective  areas  ? 

Governor  McNutt.  The  War  Manpower  Commission  with  the  pro- 
curement agencies  is  responsible. 

The  Chairman.  That  is  the  Air  Corps  would  be  responsible  in  this 
case? 

Governor  McNutt.  Certainly.  But  we  are  there  to  help.  We  have 
utilization  people.  We  sent  one  into  Bell  Aircraft  at  their  invitation. 
If  a  plant  is  producing  on  Government  contract  we  have  no  authority 
to  send  anybody  in  without  clearance  with  the  appropriate  procure- 
ment agency.    A  procurement  agency  can  send  somebody  in. 

Senator  Ferguson.  How  do  you  mean,  you  have  no  authority? 
Your  office  is  under  a  directive  by  the  President. 

Governor  McNutt.  That  is  right. 

Senator  Ferguson.  So  you  would  have  that  authority  if  the  Presi- 
dent would  give  it  to  you ;  is  that  true  ? 

Governor  McNutt.  That  is  true. 

Senator  Ferguson.  Now  who  has  he  given  it  to  by  a  directive,  to 
look  into  the  efficiency? 

Governor  McNutt.  The  War  Manpower  Commission  in  Executive 
Orders  Nos.  9139  and  9279,  but  I  don't  believe  that  question  is  neces- 
sarily involved  here.  We  certainly  have  not  been  given  a  sufficient 
staff  to  make  an  examination  of  all  these  war  plants.  That  is  clear  to 
everybody.  We  have  asked  for  more  people.  We  have  more  requests 
now  from  employers  on  war  work  for  utilization  experts  than  we 
can  possibly  furnish.  Now,  Senator,  I  have  taken  a  man  who  made 
the  Bell  examination  and  did  a  grand  job;  everybody  admits  that. 
I  sent  him  down,  at  the  invitation  of  North  American,  mind  you,  to 
go  in  there  and  make  a  similar  study  of  North  American. 

Senator  Ferguson.  That  was  done  before  or  after  putting  it  in  a 
critical  area?    That  is  what  the  committee  wants  to  know  about. 

Governor  McNutt.  We  haven't  sufficient  help  to  do  that,  Senator. 

Senator  Ferguson.  What  facts  had  you  before  you  at  the  time  you 
declared  this  to  be  a  critical  area  on  the  efficiency  question  of  the 
employees  in  the  plant  at  the  time  that  they  made  their  demand  for 
more  employees? 

Governor  McNutt.  Well,  I  had  evidence  of  the  War  Department 
as  to  that,  but 

Senator  Ferguson.  Don't  you  think  that  is  an  important  point? 
Here  is  what  I  want  to  get  at,  declaring  a  plant  a  critical  area,  or  an 
area  a  critical  area,  means  two  things.  That  if  the  industry  in  that 
particular  area  is  inefficient  at  that  time  it  means  that  we  are  going 
to  get  less  goods  out  of  that  area  for  the  civilian  population;  it  means 
that  we  are  going  to  get  less  war  goods  of  another  kind.  Now,  don't 
you  think  that  the  principal  thing  in  the  set-up  is  the  efficiency  of 
the  labor  in  the  particular  area  at  the  time? 

Governor  McNutt.  It  is  very  important;  there  is  no  question 
about  it. 

Senator  Ferguson.  How  could  you  declare  it  a  critical  area  if 
you  don't  know  how  efficient  it  is? 

Governor  McNutt.  For  the  simple  reason  that  the  demand  is  there 
for  the  labor  and  the  pressures  are  on  us,  as  they  are  on  us  from  the 
production  agencies  to  put  the  labor  there,  just  as  they  are  on  us  right 
now  for  Boeing,  Wichita,  for  example. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8551 

Senator  Ferguson.  Can't  this  happen,  then  ?  Let's  take  A  area  and 
B  plant  in  that  area;  B  plant  being  an  airplane  plant  can  make  a 
demand  for  any  amount  of  labor.  We  will  say  it  is  inefficiently  using 
the  labor  that  it  has  then  in  the  plant.  By  creating  this  demand  it 
places  the  entire  area  in  No.  1  critical.  That  means  that  it  is  the 
only  plant  really  that  can  get  any  labor  into  that  area.  Now,  by 
virtue  of  that  demand,  without  knowing  its  efficiency,  without  know- 
ing whether  or  not  this  demand  is  an  actual  demand  to  produce  those 
planes,  in  that  whole  area  we  have  reduced  the  output  of  other  war 
plants  because  they  can't  get  new  contracts ;  they  can't  produce  on  old 
contracts  in  excess  of  what  they  were  producing  because  they  can't 
get  more  help.  We  cut  down  civilian  goods  in  that  area.  Don't  you 
think,  as  the  statement  of  the  chairman  says,  that  we  should  first  go 
into  the  efficiency  and  pay  more  attention  to  the  efficiency  than  we 
have  been  paying  in  the  past,  that  someone  has  to  be  responsible  for 
the  efficiency  and  that  should  come  to  you  and  you  should  not  declare 
it  a  critical  area  until  you  are  satisfied  that  the  people  are  used 
efficiently  ? 

Governor  McNutt.  I  have  here  in  connection  with  North  American 
the  statement  of  a  general  officer  of  the  Air  Corps,  who  is  presumed 
to  know. 

The  Chairman.  Governor,  I  started  to  say  a  moment  ago  that  the 
members  of  this  committee  have  themselves,  I  imagine,  the  subcom- 
mittee on  aviation  and  the  subcommittee  on  shipbuilding,  visited 
nearly  every  plane  plant  and  every  ship  construction  yard  in  this 
country,  and  we  have  of  our  own  knowledge  seen  this  very  situation 
developing.  We  have  talked  of  it,  we  have  quarreled  about  it,  we  have 
done  everything  we  know  how  to  call  attention  of  somebody  who  ought 
to  be  resopnsible,  that  there  is  inefficiency  in  the  utilization  of  labor  in 
all  these  plants. 

Now  I  personally  have  just  returned  from  a  trip  to  the  area  in  the 
Middle  West;  I  was  out  there  on  other  business  but  incidentlly  while 
I  was  there  I  visited  plants  and  camps  and  everything  else  in  the  area, 
and  we  know  that  cases  just  such  as  this  now  exist.  Now  this  plant 
says  they  don't  need  10,000  men ;  that  they  said  they  did  need  them  and 
were  hoarding  labor.  They  are  doing  it  in  every  plant  in  the  country 
and  it  seems  to  me  that  you  or  somebody  ought  to  assume  the  respon- 
sibility to  find  out  exactly  what  goes  on  and  to  find  out  exactly  whether 
these  people  are  efficiently  utilizing  the  labor  which  they  are  hoarding. 

Governor  McNutt.  We  can,  Mr.  Chairman,  if  you  will  give  us  the 
machinery  with  which  to  do  it. 

The  Chairman.  For  instance,  can't  you  take  such  able  fellows  as 
Wilson  of  the  War  Production  Board,  or  this  Army  outfit  itself  ought 
to  look  into  this. 

Governor  McNutt.  Wilson  has  never  said  a  word  to  me  about  that. 

Senator  Ferguson.  You  do  think  it  would  be  a  good  suggestion  that 
it  be  delegated  to  Mr.  Wilson  and  that  he  be  responsible  for  the  ef- 
ficiency, and  that  come  to  you  as  part  of  your  report  ? 

Governor  McNutt.  Actually  he  is  not  the  procurement  agency. 
The  contract  is  made  by  the  Army  or  Navy. 

The  Chairman.  But  he  is  an  experienced  production  man  and  he 
knows  when  they  are  rightly  utilizing  labor,  and  I  am  satisfied  that 
Wilson  would  go  into  any  plant  you  would  request  him  to. 


8552     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Governor  McNutt.  He  can't  be  all  over  this  country,  with  the  de- 
mands that  are  made  on  him.  The  same  thing  is  true — may  I  go  ahead 
then,  and  answer  your  second  question?  I  will  make  the  statement 
as  to  what  I  am  willing  to  do  on  this  thing  and  I  want  to  put  Mr.  Wil- 
son's telegram  in  the  record.  Incidentally,  I  want  to  point  out  he 
doesn't  mention  utilization;  he  puts  this  reduction  on  two  different 
grounds  completely,  but  I  do  want  to  say  that  we  were  amply  justified ; 
we  were  justified  by  reason  of  the  statement  of  the  general  officer  of 
the  Air  Corps,  who  is  supposed  to  know.  We  had  before  us  the  E.  S- 
270's.  We  have  to  work  somewhat  on  the  good  faith  of  the  people 
with  whom  we  deal  in  this  country,  Mr.  Chairman. 

The  Chairman.  I  know  you  have,  Governor,  I  appreciate  that,  but 
here  is  the  situation.  Mr.  Wilson  himself  went  down  there  and  made 
this  survey  personally  and  Mr.  Wilson  is  a  production  man,  and  when 
he  sent  us  this  telegram  we  know  that  he  knows  what  he  is  talking 
about.  Why  can't  you  have  somebody  or  request  somebody — I  know 
anybody  would  do  it  in  the  Government  that  has  the  authority  to  do 
it — to  do  just  what  Wilson  has  done  in  all  these  plants  and  find  out 
how  inefficient  they  are.  Then  I  think  we  will  find  there  will  be  no 
labor  shortage  in  this  country. 

Governor  McNutt.  Will  you  let  me  finish  my  statement,  please  ? 

The  Chairman.  We  are  wrought  up  on  this  situation. 

Governor  McNutt.  The  answer  to  your  question,  I  repeat  again,  is 
that  I  think  we  were  justified.  We  had  the  E.  S.  270's  against  which 
we  applied  the  limiting  factors;  that  is,  where  an  employer  did 
not  hire  up  to  what  he  said  he  was  going  to  need  we  applied  that 
limiting  factor  against  him.  We  know  what  he  said  he  needed.  Now 
curiously  enough — maybe  not  curiously  enough,  because  they  have 
done  a  good  job — we  haven't  been  more  than  2  percent  off  the  country 
over  on  these  estimates  of  those  hired  as  against  those  requested.     s 

Senator  Wallgren.  You  say  you  feel  you  were  justified  in  creating 
this  critical  area?  The  point  I  am  getting  at  is  you  are  setting  a 
pattern  which  if  you  follow  it  over  the  rest  of  the  Nation  is  going  to 
cause  us  a  great  deal  of  trouble,  because  Fort  Worth  and  Dallas  and 
that  immediate  vicinity  is  where  you  have  your  densely  populated 
area.  That  is  your  densely  populated  area,  taking  in  both  Fort 
Worth  and  Dallas.  Yet  you  divide  that  populated  area  and  leave 
Fort  Worth  and  Dallas  or  Tarrant  County  outside  the  critical  area 
and  make  Dallas  a  critical  area. 

Now  as  I  said  awhile  ago,  throughout  the  West  people  are  travelling 
60  miles  to  get  to  their  work,  while  here  people  living  within  this 
Fort  Worth  area  are  a  very  few  miles  away  from  the  plant.  If  you 
were  to  do  this  elsewhere  I  know  it  will  cause  a  great  deal  of  trouble. 
If  you  are  going  to  make  a  critical  area  at  all  in  that  why  don't  you 
take  in  Fort  Worth,  Tarrant  County,  and  all  that  densely  populated 
area  ? 

Governor  McNutt.  It  was  all  one  area. 

Senator  Wallgren.  Not  in  this  instance. 

Governor  McNutt.  It  was  all  one  area  and  then  it  was  divided,  and 
I  stated  the  reasons  for  dividing  it. 

Senator  Wallgren.  The  reasons  for  dividing  it 

Governor  McNutt.  That  actually  the  labor  within  Dallas  County 
was  being  furnished  to  those  plants  and  that  if  there  was  any  inter- 
change they  offset  each  other. 


INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM     8553 

Senator  Wallgeen.  Now  the  testimony  we  obtained  over  there  in 
Dallas  was  just  opposite  to  that  because  we  found  that  actually  just 
as  many  people  were  working  in  the  Dallas  plant,  North  American 
plant,  who  lived  over  in  Fort  Worth  in  Tarrant  County  and  outside 
counties  as  there  were  that  lived  in  Dallas  County.  Why  should 
they  be  charged  up  to  Dallas  County  ? 

Governor  McNutt.  You  have  not  given  me  the  privilege  of  reading 
the  testimony  you  took.  You  sent  it  to  Mr.  Wilson  but  didn't  send  it 
to  me. 

Mr.  Fulton.  You  didn't  ask  for  it,  in  fact  didn't  indicate  much  in- 
terest in  it  when  we  were  talking  about  it. 

Governor  McNutt.  I  don't  care  for  any  remarks  of  that  kind  Mr. 
Fulton;  I  have  had  a  vital  interest  in  all  of  these  things  that  have 
gone  on  here,  Mr.  Chairman.  I  think  that  is  entirely  unjustified; 
I  would  like  very  much  to  see  the  testimony. 

The  Chairman.  Our  record  is  available  any  time  you  want  it  and 
if  you  want  it  we  will  be  happy  to  present  it  to  you ;  it  was  available. 

Governor  McNutt.  I  should  think  it  would  be  sent  to  me,  Mr.  Chair- 
man, wouldn't  you  ?    It  was  sent  to  Mr.  Wilson. 

Mr.  Fulton.  We  had  no  request  from  you. 

Governor  McNutt.  Did  you  have  from  Wilson? 

Mr.  Fulton.  Yes. 

The  Chairman.  We  would  send  it  to  any  Government  agency ;  our 
records  are  never  closed  to  anybody  in  connection  with  the  Govern- 
ment.   You  will  be  furnished  a  copy  of  it. 

Governor  McNutt.  May  I  finish  my  answer,  please?  It  was  the 
second  question  put  by  Senator  Wallgren  and  if  you  will  permit  me 
to  finish  it,  I  shall.  I,  of  course,  knew  that  Mr.  Wilson  was  there; 
I  talked  to  him  just  before  he  left.  We  discussed  the  whole  situ- 
ation. He  was  there  together  with  some  representatives  of  the 
Army  Air  Forces,  War  Manpower  Commission.  They  met  with 
the  president  of  the  North  American  Aviation  Corporation  and  his 
staff.  They  seem  to  have  reviewed  the  company's  production  sched- 
ule and  the  resulting  labor  requirement.  The  production  schedule, 
I  am  informed  by  wire  this  morning,  received  in  the  office  at  8 :  32 
from  Mr.  Wilson,  is  being  reduced  because  of  material  and  engine 
delivery  problems,  and  that  this,  together  with  a  revision  in  the 
estimate  of  learning  time  required  by  new  employees,  has  resulted  in 
a  reduction  of  approximately  10.000  workers  from  the  earlier  amounts 
at  peak  demand. 

Those  are  the  two  reasons  given  in  this  wire,  and  I  shall  put  it  in 
the  record  [reading  Exhibit  No.  908]  : 

Washington,  D.  C,  October  27,  1943. 
Paul  V.  McNutt, 

War  Manpower  Commission,  Social  Security  Board, 

Washmgton,  D.  C. 
The  following  represents  conclusions  reached  with  respect  to  the  manpower 
requirements  of  North  American  Aviation,  Inc.,  as  a  result  of  our  investigation 
to  date.  Based  on  these  conclusions  it  would  appear  that  you  may  immediately 
desire  change  status  of  Dallas  its  No.  1  area.  If  so,  will  appreciate  your  wired 
advices  as  we  have  withheld  all  public  announcement  thus  far,  regardless  of 
natural  pressure. 

The  estimated  manpower  requirements  of  North  American  Aviation's  Dallas 
plants  have  been  reduced  by  approximately  10,000  workers  from  the  previously 
announced  peak-load  requirements  results  from  a  combination  of  several  factors 
upon  which  there  is  complete  agreement  between  the  management  of  North 
American  Aviation  and  representatives  of  the  War  Production  Board. 
311932 — 44 — pt.  21 4 


8554     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

The  War  Manpower  Commission  and  the  United  States  Army  Air  Forces,  tne 
Aircraft  Production  Board,  on  which  are  represented  the  air  services  and  the 
"War  Production  Board,  must  continually  revise,  increase,  or  reduce  schedules  on 
the  basis  of  materials  and  fabricated  units,  such  as  engines  and  instruments, 
available  for  aircraft  production.  Realistic  rescheduling  of  future  production 
by  the  Aircraft  Production  Board,  taking  into  full  consideration  actual  require- 
ments of  the  air  services.  The  over-all  availability  and  flow  of  war  materials 
and  ability  to  supply  engines  and  other  items  to  the  aircraft  manufacturer  is 
reflected  in  new  schedules  which  have  just  been  released  to  aircraft  manufac- 
turers. The  net  effect  in  North  American  Aviation's  case  is  a  reduction  of  4,000 
men  and  women  from  previously  stated  peak-labor  requirements  for  the  Dallas 
plant. 

The  War  Production  Board,  the  War  Manpower  Commission,  and  Army  Air 
JPorces  officials  have  carefully  studied  the  current  operations  of  the  plants  and  it 
has  been  agreed  by  the  representatives  of  these  agencies  and  the  North  American 
management  that  on  the  basis  of  existing  efficiency  levels  the  efficiency  factor 
used  in  calculating  the  manpower  requirements  during  the  period  of  rapid 
build-up  in  personnel  was  approximately  12%  percent  too  conservative. 

In  brief,  the  efficiency  level  of  the  rapidly  expanding  organization  has  bettered 
the  advance  requirements  upon  which  the  ultimate  peak  labor  demand  was  based. 
This  recalculation  resulted  in  a  further  reduction  of  peak  labor  requirements, 
by  approximately  6,000  workers.  As  a  result  of  these  two  reductions  in  require- 
ments North  American  will  need  to  hire  only  a  minimum  of  new  employees  until 
January  1944,  principally  for  replacements,  and  after  that  time  the  build-up  to 
the  ultimate  stabilized  manpower  load  in  the  Dallas  plants  will  be  on  a  gradual 
scale  based  upon  the  new  schedules. 

C.  E.  Wilson. 

I  should  like  to  emphasize  in  the  light  of  the  discussion  concerning 
utilization  that  there  isn't  anything  in  this  wire  of  Mr.  Wilson's  which 
indicates  that  the  reduction  in  the  requirements  is  being  made  because 
of  utilization  factor.  Now  the  information  given  to  me  in  effect  estab- 
lishes a  ceiling. 

(The  telegram  referred  to  was  marked  "Exhibit  No.  908"  and  ap- 
pears in  full  in  the  text  on  pp.  8553-8554.) 

The  Chairman.  He  says  very  plainly  in  this  wire  to  us  that  part  of 
it  was  due  to  inefficiency. 

Mr.  Fulton.  I  think,  Mr.  McNutt,  to  quote  his  telegram,  North 
American  will  need  to  hire 

Governor  McNutt.  Will  you  let  me  answer  the  question,  because 
this  is  the  wire  I  received ;  this  is  the  only  information  I  have.  Then 
let  me  hear  the  other  one,  but  I  want  to  put  this  wire  in  the  record. 

Senator  Hatch.  Your  reference  to  utilization  is  from  the  informa- 
tion  you  obtained  in  your  wire  from  Mr.  Wilson  ? 

Governor  McNutt.  Mr.  Wilson  did  not  mention  utilization. 
Now,  the  information  given  me  in  effect  establishes  a  ceiling  of  about 
40,000  workers  at  this  North  American  plant.  That  is  a  ceiling. 
If  they  want  to  establish  it  I  will  respect  that  ceiling;  it  doesn't 
make  any  difference.  Heavens,  the  fewer  critical  areas  we  have  in 
this  country  the  happier  I  am.  Our  troubles  diminish  with  numbers 
of  critical  areas. 

North  American's  employment  was  37,800  as  of  last  Monday.  Now 
on  a  basis  of  this  information  the  labor  demand  and  supply  relation- 
ship in  Dallas  is  substantially  in  balance  and  a  reclassification  from 
group  1  to  2  is  thus  permissible.  I  shall  direct  it  on  the  basis  of  this 
and  it  will  remain  in  effect  as  long  as  that  relationship  continues.  I 
should  like  to  add  that  an  effective  local  community  manpower  pro- 
gram is  now  in  operation  in  Dallas  and  that  the  efforts  of  the  local 
organization,  supported  by  the  citizens  of  the  community  and  indi- 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8555 

cated  by  several  wires  received  yesterday  and  by  the  Management- 
L.abor  Committee,  is  making  a  real  contribution  toward  the  solution 
of  the  manpower  problem. 

Now  the  classification  in  group  1  is  not  a  punitive  device  at  all;  we 
take  no  punitive  action.  It  is  designed  to  call  the  attention  of  the 
community  to  the  character  of  the  manpower  problem  to  stop  any 
deterioration  of  that  situation  and  for  the  record,  if  I  may  put  this 
in,  I  should  like  to  have  the  telegram  back  as  I  have  no  copy. 

The  Chairman.  The  reporter  will  send  it  back  to  you  as  soon  as  we 
are  through  with  it,  and  we  will  place  the  one  we  received  in  the 
record. 

Gkand  Pbairie,  Tex.,  October  27,  1943. 
Senator  Haeey  Tkuman, 

Senate  Office  Building,  Washington,  D.  C: 

The  following  represents  conclusions  reached  as  result  investigation  North 
American  Aviation's  Dallas  Plant  manpower  requirements.  Have  advised  Paul 
McNutt  these  conclusions  because  effect  of  same  on  determination  Dallas  as  No. 
1  area  and  probability  War  Manpower  Commission  may  desire  immediate  change 
this  status. 

The  estimated  manpower  requirements  of  North  American  Aviation's  Dallas 
plants  have  been  reduced  by  approximately  10,000  workers  from  the  previously 
announced  peak  load.  This  reduction  from  the  previously  announced  peak  load 
requirements  results  from  a  combination  of  several  factors,  upon  which  there 
is  complete  agreement  between  the  management  of  North  American  Aviation 
and  representative  of  the  War  Production  Board,  the  War  Manpower  Commis- 
sion, and  the  United  States  Army  Air  Forces.   ; 

The  Aircraft  Production  Board,  on  which  are  represented  the.  air  services  and 
the  War  Production  Board,  must  continually  revise,  increase  or  reduce  schedules 
on  the  basis  of  materials  and  fabricated  units,  such  as  engines  and  instruments 
available  for  aircraft  production.  Realistic  rescheduling  of  future  production 
by  the  Aircraft  Production  Board,  taking  into  full  consideration  actual  require- 
ments of  the  air  services,  the  over-all  availability  and  flow  of  war  materials,  and 
ability  to  supply  engines  and  other  items  to  the  aircraft  manufacturer,  is  re- 
flected in  new  schedules  which  have  just  been  released  to  aircraft  manufacturers. 
The  net  effect,  in  North  American  Aviation's  case,  is  a  reduction  of  4,000  men 
and  women  from  previously  stated  peak  labor  requirements  for  the  Dallas 
plants. 

The  War  Production  Board,  the  War  Manpower  Commission,  and. Army  Air 
Forces  officials  have  carefully  studied  the  current  operations  of  the  plants,  and 
it  has  been  agreed  by  the  representatives  of  these  agencies  and  the  North  Amer- 
ican management  that  on  the  basis  of  existing  efficiency  levels  the  efficiency 
factor  used  in  calculating  the  manpower  requirements  during  the  period  of 
rapid  build-up  in  personnel  was  approximately  12%  percent  too  conservative. 
In  brief,  this  efficiency  level  of  the  rapidly  expanding  organzation  has  bettered 
the  advance  estimates  upon  which  the  ultimate  peak  labor  demand  was  based. 
This  recalculation  resulted  in  a  further  reduction  of  peak  labor  requirements 
by  approximately  6,000  workers. 

As  a  result  of  these  two  reductions  in  requirements  North  American  will 
need  to  hire  only  a  minimum  of  new  employees  until  January  1944,  principally 
for  replacements,  and  after  that  time  the  build-up  to  the  ultimate  stabilized 
manpower  load  in  the  Dallas  plants  will  be  on  a  gradual  scale  based  upon  the 
new  schedules. 

For  information  you  and  your  committee  please  be  advised  continuing  investi- 
gation various  other  phases  through  today  and  tomorrow.  If  you  desire,  other 
information  can  be  reached  through  North  American  Aviation,  Inc.,  Dallas. 
Regardless  natural  local  pressure,  have  made  no  announcement  conclusions  this 
for  but  assuming  McNutt  immediately  changes  status  of  Dallas  believe  in  order 
to  make  announcement  tomorrow. 

C.  E.  Wilson. 

(The  telegram  referred  to  was  marked  "Exhibit  No.  909"  and 
appears  in  full  in  the  text  above.) 


8556     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Senator  Ferguson.  I  think  a  very  important  thing  to  the  committee 
is  that  the  whole  country — why  was  this  evidence  not  obtained  before 
you  placed  this  in  a  critical  area  ?  You  now  discover  that  an  investi- 
gation by  Mr.  Wilson  and  by  your  organization  shows  no  need  for  a 
No.  1  critical  area  and  it  can  be  now  changed. 

Governor  McNutt.  Just  a  minute. 

Senator  Ferguson.  I  am  just  trying  to  get  at  whether  or  not  we 
can't  get  a  system  so  that  you  can  get  the  facts  before  you  declare  a 
critical  area,  rather  than  in  this  particular  case  now  demonstrated 
that  you  get  the  facts  after  it  has  been  declared  a  critical  area  and 
the  change  is  to  be  made. 

Governor  McNutt.  The  two  reasons  given  by  Mr.  Wilson  in  his 
wire  are  first  of  all  that  there  are  new  schedules  that  have  just  been 
released,  I  quote  him,  "to  aircraft  manufacturers." 

Senator  Ferguson.  Are  those  new  schedules  due  to  the  fact  that 
this  plant  with  its  efficiency  could  not  possibly  produce  the  schedule 
that  had  been  given  to  it?  I  can't  quote  figures  here,  but  I  would 
say  that  the  production  was  one-fifth  in  the  month  of  August  to  what 
the  schedules  were.     Now,  isn't  it  true  that  if  you  have  schedules 

Governor  McNutt.  I  think  it  is  closer  to  one-sixth  if  you  want  to 
know  the  truth. 

Senator  Ferguson.  I  think  you  are  right,  one-sixth.  So  if  we 
have  schedules  saying  that  we  are  to  produce  six  times  what  the  effi- 
ciency of  the  plant  will  produce,  then  why  should  we  declare  an  area 
critical  on  any  such  figure? 

Governor  McNutt.  There  is  no  indication  in  Mr.  Wilson's  wire 
that  that  is  the  reason  for  this  wire.  In  the  first  place  there  has  been 
a  cut-back ;  he  doesn't  say  why. 

Senator  Wallgren.  Just  couldn't  use  the  men. 

Governor  McNutt.  He  doesn't  say  why;  I  let  the  wire  speak  for 
itself. 

The  Chairman.  They  are  under  no  responsibility  as  to  the  cost  of 
this  labor ;  they  don't  care  how  many  they  hire ;  the  Federal  Govern- 
ment pays  for  them  if  they  use  2,000  men  where  they  ought  to  use  500,. 
and  what  we  are  trying  to  get  at  is  to  find  some  way  to  prevent  them 
from  doing  that. 

Governor  McNutt.  Let  me  answer  one  other  thing. 

Mr.  Fulton.  Might  I  put  into  the  record  what  Mr.  Wilson  did  act- 
ually say  to  me  when  I  was  instructed  to  ask  him  those  questions? 
Mr.  Wilson  made  three  points  last  week  after  studying  the  record  and 
after  having  spent  several  hours  in  conference  with  Mr.  Kindelberger, 
the  president  of  the  company.  By  the  record  I  mean  the  record  and 
the  testimony  taken  by  the  subcommittee  on  aviation  in  Dallas.  Mr. 
Wilson  said  first  there  was  no  doubt  whatever  in  his  mind  but  what 
the  plant  was  grossly  inefficient,  Second,  that  there  was  also  no  doubt 
but  what  it  could  be  made  more  efficient;  and,  third,  that  in  his  opin- 
ion until  it  was  made  more  efficient  it  couldn't  usefully  employ  more 
men,  except  for  replacements,  and  pursuant  to  the  direction  of  the 
Chairman,  Mr.  McNutt,  I  telephoned  you  and  I  believe  told  you  those 
three  points,  and  I  believe  you  expressed  complete  agreement  with  the 
first  two,  and  stated  that  you  hadn't  heard  from  Mr.  Wilson  on  the 
third. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8557 

Governor  McNutt.  I  had  not ;  since  that  time  I  have  talked  to  Mr. 
Wilson.  It  would  not  be  for  me  to  say  what  Mr.  Wilson  told  you,  but 
it  is  for  me  to  say  what  Mr.  Wilson  told  me. 

The  Chairman.  That  is  all  right. 

Governor  McNutt.  On  the  third  point  he  said,  "I  will  make  no 
prediction."  He  said,  "I  don't  know."  On  the  third  point  he  said, 
"I  do  not  know." 

Mr.  Fulton.  He  does  now  because  in  his  telegram  to  us  he  said, 
"North  American  will  need  to  hire  only  a  minimum  of  new  employees 
until  January  1944,  principally  for  replacements,  and  after  that  time 
the  build-up  to  the  ultimate  stabilized  manpower  load  in  the  Dallas 
plants  will  be  on  a  gradual  scale,  based  upon  the  new  schedules."  That 
is  precisely  what  he  told  me  last  Tuesday,  except  that  he  didn't  give 
the  date  January  1944. 

Governor  McNutt.  He  didn't  give  any  date  but  what  he  told  me 
was  that  he  did  not  know  until  he  got  down  there.  As  I  say,  the  two 
reasons  that  he  gives  here,  first,  that  there  has  been  a  rescheduling,  re- 
flected in  new  schedules  which  have  just  been  released  to  aircraft  man- 
ufacturers ;  this  is  not  alone  for  North  American  plant. 

Mr.  Fulton.  The  schedule  merely  reflects  what  you  expect  to  pro- 
duce, the  efficiency,  and  the  efficiency  of  your  suppliers. 

Governor  McNutt.  The  other  was  that  the  efficiency  factor  in  calcu- 
lating the  manpower  requirements  during  the  period  of  rapid 
build-up  was  approximately  12^2  percent  too  conservative.  In  other 
words,  they  are  learning  faster  than  they  thought  they  were  going  to. 

Mr.  Fulton.  Because  they  now  realize  they  don't  have  to  count 
on  as  much  waste  as  they  were  satisfied  in  counting  on  then. 

Senator  Wallgren.  Isn't  it  rather  common  for  these  plants  when- 
ever they  obtain  a  contract  to  immediately  go  out  and  hoard  as  much 
labor  as  they  possibly  can  and  hold  it  ? 

Governor  McNutt.  It  has  .been  a  constant  battle,  Senator,  and  I 
yield  to  no  one  in  a  desire  to  get  rid  of  that  thing. 

Senator  Hatch.  You  said  a  while  ago  you  had  no  directive  or  no 
authority  to  go  into  these  plants  in  the  first  instance  and  determine  on 
the  efficiency  of  labor  before  declaring  it  a  critical  area.  Would  it  be 
helpful  if  you  had  such  authority? 

Governor  McNutt.  Certainly,  but  at  the  same  time  giving  me  the 
authority  would  mean  that  likewise  you  would  have  to  make  it  pos- 
sible for  me  to  make  that  kind  of  an  investigation. 

Senator  Hatch.  What  would  that  require?  V 

Governor  McNutt.  That  would  require  the  enlargement  of  our 
Bureau  of  Labor  Utilization.  We  are  a  service  agency  now ;  anyone 
who  wants  these  services 

Senator  Wallgren.  Isn't  that  a  job  of  the  Army  and  of  Mr.  Wil- 
son? 

Senator  Ferguson.  Rather  than  the  service  agency. 

Senator  Wallgren.  Wouldn't  that  be  a  duplication  of  effort  there? 

Governor  McNutt.  I  don't  think  we  have  duplicated  effort. 

Senator  Wallgren.  Wouldn't  you  just  be  doing  a  job  supposed  to 
be  done  now  by  the  Army  and  by  Mr.  Wilson  ? 

Governor  McNutt.  You  would  think  if  you  were  making  a  con- 
tract that  you  would  take  a  look  at  how  it  was  being  performed. 

The  Chairman.  That  is  exactly  what  you  would  do,  and  why 
hasn't  the  fellow  responsible  for  the  procurement  in  letting  this  con- 


8558     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

tract  looked  into  this  efficiency  ?    That  is  what  he  is  there  for.    I  am 
criticizing  the  fellow  responsible  for  it. 

Governor  McMtttt.  We  are  continuously  driven  by  the  procurement 
agencies  on  specific  plans  for  the  furnishing  of  people  and  at  times 
they  have  disagreed  among  themselves  as  to  which  had  priority. 
There  was  an  instance  like  that  even  yesterday  where  we  were  fur- 
nishing labor  for  two  plants. 

Senator  Ferguson.  Governor,  isn't  this  what  is  wrong?  You  say 
that  a  demand  from  the  company  for  labor — if  they  don't  hire  the 
number  of  men  that  they  told  you,  then  that  is  held  against  them. 
All  right.  Now  a  plant  is  on  a  cost-plus  contract;  they  make  a  de- 
mand.   In  fact  this  North  American  made  a  demand. 

Governor  McNutt.  They  made  a  demand  on  us  for  over  18,000  and 
we  cut  it  to  10,000. 

Senator  Ferguson.  And  you  took  their  demand.  Now  isn't  there 
every  reason  under  the  sun  why  they  will  hire  not  only  their  demand 
because  they  are  not  paying  for  it,  but  they  will  hire  more  than  their 
demand  so  they  will — in  this  case  here  we  find — get  fees'  upon  the 
cost  of  the  production  ? 

Governor  McNutt.  I  suppose  that  is  a  perfectly  human  trait,  and 
T  am  not  here  for  one  moment  to  defend  cost-plus  contracts ;  I  don't 
believe  in  them. 

Senator  Ferguson.  I  agree  with  you  on  that.  Now  isn't  it  essen- 
tial then  that  someone,  let  us  say  the  contracting  agency,  look  into 
the  efficiency  of  the  labor  that  is  performing  the  contract  ? 

Governor  McNutt.  I  will  tell  you  what  our  utilization  group  does. 
It  is  not  a  matter  of  their  looking  into  the  efficiency;  it  is  a  matter 
of  helping  them  become  more  efficient.  That  is  our  whole  story  in 
Training- Within-Industry  and  we  have  done  a  tremendous  job.  En- 
tirely outside  appraisal  of  that  work  in  this  last  copy  of  Reader's 
Digest  is  worth  looking  at.    Did  you  see  that? 

Senator  Ferguson.  Governor,  don't  we  need  more  than  a  helping? 
Don't  we  as  a  Nation  need  the  demand  for  more  efficiency  ? 

Governor  McNutt.  I  agree  and  I  would  suppose,  Senator,  that 
these  representatives  of  the  procurement  agencies  that  are  in  these 
plants — and  the  procurement  agency  in  this  instance  had  a  represen- 
tative in  this  plant — would  perform  their  duty. 

Senator  Wallgren.  We  need  training  in  the  higher  brackets,  don't 
you  think? 

Governor  McNutt.  I  will  reserve  my  comment  on  that;  I  work 
with  these  men,  Senator. 

Senator  Hatch.  Let  me  make  this  suggestion ;  this  thought  just 
comes  to  me.  You  say  the  contracting  agency;  that  particular  con- 
tracting agency  we  will  say  is  the  Army.  The  contractor  may  not 
need  labor  today  but  he  says,  "I  may  need  it  tomorrow ;  I  will  keep 
these  fellows  here."  The  Army  comes  along;  it  is  interested  in  pro- 
duction ;  it  wants  these  things  out,  and  maybe  you  don't  need  them 
today;  maybe  you  do  tomorrow;  that  is  all  right.  Now  you  are 
charged  with  the  whole  over-all  labor  situation.  I  am  wondering  if 
perhaps  you 

Governor  McNutt.  I  will  tell  you,  for  example,  Senator,  just  what 
happens  within  an  hour.  I  am  approached  by  the  procurement 
agencies  of  theArmv  on  a  certain  plant,  asking  for  a  stay  of  indue- 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8559 

tion  for  some  1,400  men.  Within  the  hour  I  am  also  approached  by 
Gl  of  the  Army  with  a  demand  that  would  make  it  impossible  to 
fulfill  the  first  request.  I  get  in  a  position — and  I  hate  to  make 
the  comparison — like  Solomon  dividing  the  child.  It  is  one  procure- 
ment agency  making  both  requests;  it  is  a  division  of  the  child 
between  the  two  parts  of  that  agency. 

Senator  Ferguson.  How  can  that  set  of  facts  exist?  Someone  is 
wrong. 

Governor  McNutt.  I  tried  to  convince  the  procurement  side  that  the 
replacement  schedules  in  this  particular  instance  were  sound.  I  sent 
for  them.  They  were  delivered  here.  I  took  them  over  to  the  3-star 
general  in  the  Army  and  laid  them  before  him  and  he  said  that  on 
that  basis  he  would  withdraw  the  request  that  had  been  made.  That 
is  perfectly  sound.  The  schedule  had  been  approved.  Somebody 
had 

Senator  Ferguson.  In  other  words  one  agency  had  slipped  and 
hadn't  the  facts. 

Governor  McNutt.  That  is  right,  but  that  is  one  part  of  one  agency, 
mind  you. 

Senator  Ferguson.  One  part  of  the  same  agency. 

Senator  Hatch.  I  want  to  get  back  to  that  original  question  you 
answered  a  while  ago  in  which  you  said  it  would  be  helpful  if  you 
had  the  power  to  go  into  these  plants  and  examine  into  the  efficiency 
of  the  labor  employed. 

Governor  McNutt.  Without  doubt  it  would. 

Senator  Hatch.  Would  that  duplicate? 

Governor  McNutt.  On  that  point  it  seems  to  me  that  the  procure- 
ment agencies  now  have  a  sufficient  force  to  make  such  reports  to  us, 
but  I  point  out  to  you  the  fact 

Senator  Hatch.  You  have  such  a  report? 

Governor  McNutt.  I  have  such  a  report  right  here  on  North 
American.    Can  I  believe  it  ?    Apparently  not. 

Senator  Wallgren.  Where  did  you  get  that  report? 

Governor  McNutt.  This  is  the  report  from  General  Meyers. 

Senator  Wallgren.  Do  you  consult  with  Wilson  at  all  on  matters 
of  this  kind? 

Governor  McNutt.  And  with  the  W.  P.  B.  member  of  the  War 
Manpower  Commission.  I  am  a  member  of  W.  P.  B.  We  are  on 
the  same  floor ;  we  see  each  other  whenever  it  is  necessary.  We  have 
worked  very  closely. 

Senator  Wallgren.  Has  the  general  been  down  there  to  this  partic- 
ular plant,  as  far  as  you  know  ? 

Governor  McNutt.  I  don't  know. 

Senator  Hatch.  Does  not  his  letter  say  that  from  personal  in- 
vestigation— not  perhaps  of  him  but  his  department  ? 

Governor  McNutt.  Certainly.  Aren't  these  statements  unequiv- 
vocal?  "The  employment  schedule  set  forth  above  is  required  to 
meet  the  airplane  schedules  for  these  plants.  We  have  checked  these 
figures  independently ;  we  have  checked  these  figures  independently." 
Nothing  equivocal  about  that,  is  there? 

Senator  Wallgren.  You  are  justified  in  following  what  the  Army 
tells  you ;  no  question  about  that. 

Governor  McNutt.  If  I  am  not,  Senator,  just  what  can  I  do?  I 
have  no  large  inspection  force;  we  haven't  done  business  on  that 


8560     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

basis.  What  we  have  tried  to  do  through  labor  utilization  was  to 
go  in  and  help  a  plant  become  more  efficient.  We  haven't  been  the 
detectives. 

Senator  Wallgren.  But  the  point  is  with  the  committees  for  which 
you  might  be  able  to  assist  the  committee  in  working  this  thing  out. 

Governor  McNutt.  Why,  certainly. 

Senator  Hatch.  In  fact  that  is  our  effort,  Mr.  McNutt,  to  try  to 
prevent  a  recurrence  of  this  thing,  some  suggestion,  some  help  to  you, 
or  any  other  agency  necessary.  The  subcommittee  has  done  a  good 
job;  they  discovered  this  job  and  it  ought  to  be  helpful  to  correct 
in  the  future. 

Governor  McNutt.  I  agree  with  you. 

Senator  Wallgren.  Again  I  think  this  pattern  for  setting  up  a 
critical  area  is  something  that  might  cause  a  critical  area,  if  you 
followed  it  in  other  parts  of  the  country. 

Governor  McNutt.  Senator,  I  have  had  to  be  practical  in  a  good 
many  things.  I  have  had  to  divide  areas  because  of  State  lines  and  I 
have  had  to  divide  them  because  of  pressures  coming  from  the  Senate 
of  the  United  States,  for  one  thing. 

Senator  Hatch.  State's  rights  involved. 

Governor  McNutt.  I  am  afraid  something  of  the  kind  was  involved, 
Senator. 

Senator  Ferguson.  You  think  we  should  resist  the  pressures  but  be 
willing  to  take  the  facts  ? 

Governor  McNutt.  Senator,  I  think  if  you  will  look  around  you 
will  find  I  have  been  case-hardened  and  heat-tempered  and  I  expect 
I  am  submitted  to  as  many  pressures  as  any  other  official  of  this 
Government.    I  have  tried  to  do  what  I  thought  was  right. 

Senator  Ferguson.  Governor,  how  many  men  have  you  now  out 
helping  on  the  efficiency  question  ? 

Governor  McNutt.  You  mean  how  many  in  the  utilization  field? 
Dr.  Sparks,  how  many  on  the  list  today? 

Dr.  Sparks.  There  is  a  total  of  about  600  in  the  field,  if  you  count 
the  people  that  are  assigned  to  the  manning  tabling  division,  which  is 
a  very  important  supporting  division  of  the  engineering  staff.  There 
are  about  125  of  the  industrial  engineers. 

The  Chairman.  Let  the  doctor  give  his  full  name  and  connections 
for  the  record. 

Governor  McNutt.  May  I  give  it  for  him  ?  Dr.  Sparks  is  the  head 
of  our  Bureau  of  Utilization.  He  has  demonstrated  by  his  record  in 
the  past  that  he  is  a  man  who  knows  something  about  the  business 
of  manufacturing ;  he  has  been  a  very  successful  manufacturer. 

Senator  Wallgren.  He  ought  to  go  to  Dallas. 

Governor  McNutt.  Head  of  Noblett-Sparks. 

Senator  Ferguson.  Couldn't  these  men  that  are  out  in  the  field 
report  on  the  efficiency  if  they  are  going  to  help  in  the  efficiency? 
Don't  they  have  to  know  first  what  is  the  efficiency  and  they  could 
report  to  you  that  this  plant 

Governor  McNutt.  They  could  do  that. 

Senator  Ferguson.  Have  they  been  doing  that  in  the  past? 

Governor  McNutt.  Certainly,  but  there  are  not  enough  of  these; 
we  haven't  enough  men  to  cover  the  number  of  plants  now  engaged 
in  war  production. 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM     8561 

Senator  Ferguson.  How  many  critical  areas  have  you  ? 

Governor  McNtjtt.  Seventy-two. 

Senator  Ferguson.  Growing  by  leaps  and  bounds,  isn't  that  true  ? 

Governor  McNutt.  Yes ;  and  they  have  all  had  fair  notice  of  what 
was  coming. 

Senator  Ferguson.  Hasn't  it  come  to  the  point  where  you  could 
review  each  critical  area,  as  you  have  now  reviewed  Dallas'  critical 
area,  through  the  War  Production  Board,  to  ascertain  from  the  facts 
whether  or  not  the  various  critical  areas  could  be  reduced  and  that 
we  would  then  get  more  war  production  in  all  fields  and  we  would 
get  more  civilian  goods  by  reason  of  these  surveys  ? 

Governor  McNutt.  That  is  right,  but  W.  P.  B.  sees  this  list  before 
it  goes  out.  Now,  if  there  is  any  doubt  in  the  minds  of  W.  P.  B.  about 
it  they  can  say  so  right  then. 

Senator  Ferguson.  Is  it  because  we  have  no  agency  that  has  con- 
cerned itself  with  efficiency?    Is  that  our  trouble  today? 

Governor  McNutt.  Well,  I  wonder  if  the  procurement  agencies 
themselves  have  concerned  themselves  with  the  efficiency  of  the  plants 
in  which  they  have  contracts. 

Senator  Wallgren.  Because  the  aviation  industry  has  been  blown 
up  to  a  point  today  where  you  have  five  times  as  many  supervisors  as 
you  had  mechanics  3  years  ago. 

Governor  McNutt.  It  has  grown  by  leaps  and  bounds ;  people  have 
been  upgraded ;  men  have  gone  to  positions  that  they  never  dreamed 
of  occupying  in  that  industry  simply  because  of  the  growth.  Certainly, 
they  have  had  a  shortage  on  the  administrative  end  and  certainly  on 
the  supervisory  end. 

Senator  Wallgren.  Of  course,  they  carry  that  a  little  bit  too  far. 
They  go  over  to  California  and  take  a  man  out  of  the  personnel  ranks 
working  in  personnel,  getting  $300  a  month,  and  move  him  over  to 
North  American  and  promote  him  and  give  him  $700  a  month,  and 
he  doesn't  know  any  more  about  the  job  just  because  he  is  getting 
higher  pay.  Everybody  seems  to  think  he  ought  to  know  something 
about  what  he  is  doing ;  as  a  result,  we  run  into  the  situation  such  as 
we  found  at  North  American,  where  it  comes  to  a  question  of  manage- 
ment of  personnel.  That  same  condition  obtains,  I  think,  in  almost 
every  phase  of  the  aviation  industry,  where  they  have  just  blown  the 
industry  up  to  a  point  where  these  men  are  having  difficulty. 

Governor  McNutt.  Yet,  Senator,  may  I  say  to  you  that  the  greatest 
pressures  I  am  getting  today  are  on  air  frame  manufacture  and  the 
manufacture  of  airplane  engines  from  both  services. 

Senator  Connally.  I  want  to  ask  the  Governor  one  question,  a  little 
off  from  what  they  are  just  asking  about.  As  I  understand  it,  the 
effect  of  this  order  practically  prohibits  the  letting  of  other  additional 
Army  or  Navy  contracts  in  this  area? 

Governor  McNutt.  That  is  right. 

Senator  Connally.  Now,  I  had  a  particular  case  called  to  my  atten- 
tion yesterda}7  or  day  before,  in  which  a  concern  had  been  under  con- 
tract with  the  Army,  making  some  technical,  highly  technical,  things; 
I  think  it  was.  some  sort  of  torpedo ;  I  don't  know,  but,  anyway,  the 
Army  determined  it  didn't  want  any  more,  discontinued  the  use  of 
that  particular  weapon,  so  they  canceled  his  contract. 


8562     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

Governor  McNutt.  Not  because  of  this  but  because  they  didn't 
want  the  weapon. 

Senator  Conn  ally.  That  is  right.  I  am  not  trying  to  hornswaggle 
you,  Governor;  I  am  just  asking  for  information. 

Governor  McNutt.  I  didn't  think  you  would  be. 

Senator  Connally.  So  that  when  that  happened  he  had  no  more 
work  to  do  and  he  let  his  men  go,  but  he  represents  to  me  that  his  men 
are  not  employed  at  this  plant  of  North  American  and  have  no  inten- 
tion of  going  out  there.     They  are  in  Dallas,  idle. 

Governor  McNutt.  And  yet,  Senator,  there  is  a  demand  within 
Dallas  for  other  plants  of  over  3,000. 

Senator  Connally.  Let  me  finish  my  question,  please,  Governor. 
The  Navy  now  wants  to  let  a  contract  for  some  highly  technical  and 
important  thing  calling  for  high  skill — I  can't  reveal  the  kind  of 
weapon,  so  he  is  rated  by  the  Navy  as  one  of  five  plants  in  the  United 
States  that  can  make  this  article.  Now  he  wants  to  bid  and  he  wants 
the  right  to  reemploy  the  same  men  he  had  before  and  who  are  sitting 
still  around  Dallas,  without  jobs,  and  I  understand  under  this  ruling 
that  is  prevented ;  is  that  true  ? 

Governor  McNutt.  No  ;  that  is  not  true. 

Senator  Connally.  I  am  asking  for  information. 

Governor  McNutt.  That  contract  could  be  let  there  if  that  contract 
could  not  be  performed  elsewhere  in  this  country. 

Senator  Connally.  There  are  five  men  in  the  United  States  who 
could  make  it  and  he  is  one  of  that  five  and  yet  the  other  four  are 
going  to  get  the  business. 

Governor  McNutt.  Perhaps  they  are  loaded  with  contracts  right 
now. 

Senator  Connally.  Is  that  a  fair  proposition?  Here  are  these  men 
unemployed,  sitting  around  there,  highly  skilled,  know  how  to  do  this 
job ;  the  Navy  wants  this  stuff  and  have  qualified  him,  said,  "Now  you 
are  one  of  the  favored  ones  and  we  would  like  for  you  to  bid  on  this." 
He  says,  "I  can't  bid  under  the  War  Manpower  Act;  I  can't  take  a 
contract." 

Governor  McNutt.  If  they  issue  the  invitation  it  is  up  to  them; 
they  can  let  the  contract.  Obviously  if  there  is  a  shortage  and  these 
men  are  out  they  shouldn't  be  unemployed;  there  is  no  reason  why 
they  should  be  unemployed  if  they  are  skilled  mechanics. 

Senator  Connally.  They  are  skilled  mechanics  and  know  this  par- 
ticular kind  of  work.  He  wants  to  reemploy  them  so  he  can  bid  on 
this  contract. 

Governor  McNutt.  That  is  up  to  the  armed  services. 

Senator  Connally.  If  they  want  to  let  him  bid  they  may? 

Governor  McNutt.  Under  certain  conditions.  But  the  whole  point 
is  that  when  they  go  into  a  critical  area,  the  effort  is  to  put  enough 
men  there  to  fill  the  contracts  that  are  there  and  get  this  war  job  done. 

Senator  Connally.  The  contracts  already  made  sometimes  are  more 
important  than  some  others  that  want  to  be  made. 

Governor  McNutt.  Under  the  west  coast  plan,  for  example,  the 
War  Production  Board  sets  up  the  priorities  of  these  projects.  Which 
comes  first? 

Senator  Connally.  It  seems  to  me  if  that  were  the  case 

Governor  McNutt.  It  is  not  an  inflexible  rule. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8563 

Senator  Connally.  I  hope  it  is  not;  I  am  just  trying  to  find  out. 
Pardon  me  if  I  have  gone  too  far,  I  didn't  intend  to. 

Senator  Ferguson.  I  have  another  question.  You  stated  that  the 
local  agency  made  the  recommendation.  Isn't  it  true  in  the  Dallas 
case  that  the  local  regional — the  local  area  did  not  recommend  but  it 
was  the  regional  director,  Colonel  Carpenter,  that  made  the  recom- 
mendation in  that  case  ? 

Governor  McNutt.  You  mean  as  to  whether  or  not  this  should  be 
group  1?  Actually  it  was  a  matter  of  forwarding  the  information 
which  had  been  collected. 

Senator  Ferguson.  Did  you  know  that  this  was  true,  that  the 
United  States  Employment  Service  at  the  time  this  was  placed  in  the 
critical  area  had  10,000  applicants  for  jobs? 

Governor  McNutt.  That  wouldn't  have  filled  the  load  that  they  had 
asked  for. 

Senator  Ferguson.  Ten  thousand  people  wanting  jobs  and  the  com- 
pany making  a  demand,  we  will  say,  for  20,000,  you  would  then  put 
it  into  a  critical  area  ? 

Governor  McNutt.  It  was  something  over  18,000  that  was  not  re- 
ported as  a  part  of  the  supply  available  at  that  time.  These  are  all 
based  on  the  figures  that  come  in.  What  are  the  demands?  What 
supply  ? 

Senator  Ferguson.  But  isn't  this  true,  that  you  take  the  company's 
word  for  their  demand  and  they,  being  on  a  cost-plus  contract,  there 
is  no  check  by  the  local  agency  to  determine  whether  or  not  that  de- 
mand is  legitimate  or  illegitimate,  isn't  that  true,  that  you  have  no 
means  of  checking  ? 

Governor  McNutt.  We  have  no  means  of  checking  that,  but  if  we 
have  gotten  to  the  point  where  we  cannot  believe  the  word  of  a  man 
— we  catch  up  with  him  if  he  has  made  a  false  representation  once; 
the  next  time  we  act  in  accordance  with  his  performance. 

Senator  Ferguson.  But,  Governor,  he  doesn't  make  a  false  repre- 
sentation in  that  he  will  hire  any  number  of  men  that  you  will  give 
him. 

Governor  McNutt.  No;  his  representation  is  that  he  needs  those 
men. 

Senator  Ferguson.  Suppose  he  hires  them  and  doesn't  need  them? 

The  Chairman.  Which  they  do  all  the  time. 

Governor  McNutt.  Then  he  has  made  a  misrepresentation,  no 
question. 

Senator  Ferguson.  What  is  done  about  it? 

Governor  McNutt.  The  next  time  he  doesn't  get  them.  I  am  per- 
fectly willing  to  put  a  ceiling  on  North  American. 

Senator  Connally.  Now  when  he  makes  the  representation  that  he 
needs  so  many  men  doesn't  that  of  itself  involve  the  duty  of  finding 
out  if  he  is  telling  the  truth,  not  the  next  time  but  that  time  ? 

Governor  McNutt.  But  that  in  so  far  as  we  can 

Senator  Connally.  If  you  are  just  bound  to  accept  any  representa- 
tion he  makes  and  are  going  to  wait  until  the  next  time  before  you  do 
anything  about  it,  it  seems  to  me  anybody  who  makes  a  representation, 
the  mere  fact  of  making  it  implies  that  you  have  the  authority  to  ac- 
cept or  to  reject  and,  in  order  to  guide  you,  you  have  the  authority  to 
investigate  to  see  whether  he  is  telling  the  truth  or  not. 


8564     INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM 

Governor  McNutt.  But  who  should  know  better,  Senator,  than 
the  procurement  agency  that  has  this  contract  ? 

Senator  Connally.  I  say  the  procurement  agency — if  you  want 
my  view — most  of  them  are  damned  careless ;  it  is  the  Government's 
money  and  they  have  been  in  the  Army  or  Navy  all  their  lives  and 
never  made  a  dollar  except  on  the  Government  pay  roll,  and  we  want 
1,000,000  of  so  and  so,  come  in  here,  fellows,  come  on  and  take  the 
order.  I  say  that  in  all  kindness ;  I  have  high  respect  for  the  Army 
and  Navy,  but  everybody  that  has  been  in  Washington  and  on  these 
appropriations  knows  that  is  true,  that  they  are  extravagant,  that 
they  are  careless. 

Now  if  you  are  going  to  turn  it  over  to  the  Army  and  Navy  why 
that  is  another  thing,  but  it  seems  to  me  that  you  are  going  to  pass 
on  the  thing  yourself  and  it  is  your  duty  through  your  agency  to  find 
out  whether  they  are  telling  the  truth  or  not. 

Governor  MoNutt.  All  right,  Senator,  when  the  deficiency  bill 
comes  over  will  you  please  lend  your  most 

Senator  Connally.  Get  you  more  jobs? 

Governor  McNutt.  Get  more  men  with  which  to  work,  lend  your 
invaluable  assistance,  will  you  please,  sir  ? 

Senator  Connally.  I  will  help  to  give  you  all  I  think  you  needy 
if  you  use  those  you  have  intelligently  and  efficiently. 

Governor  McNutt.  I  think  you  will  see  from  the  record  those  we 
have  have  been  used. 

Senator  Wallgren.  In  the  case  of  North  American  plant  it  would 
be  to  the  advantage  of  that  plant,  would  it  not,  if  that  were  declared 
a  critical  area  ? 

Governor  McNutt.  Not  necessarily.  No;  you  take  Bell  Aircraft 
in  Buffalo,  which  is  a  critical  area. 

Senator  Wallgren.  Let's  take  this  one  down  in  Dallas. 

Governor  McNutt.  I  am  showing  you  what  can  happen. 

Senator  Wallgren.  The  geography  is  different. 

Governor  McNutt.  It  might  be  we  would  refer  no  more  male  labor 
there,  as  we  are  not  referring  more  male  labor  to  Buffalo. 

Senator  Wallgren.  If,  then,  they  were  going  to  get  their  48,000 
employees,  if  that  was  to  be  a  critical  area  in  the  future,  they  could 
always  depend  on  additional  help? 

Governor  McNutt.  Not  necessarily.     No. 

Senator  Wallgren.  No  one  else  could  get  them. 

Governor  McNutt.  I  am  not  so  sure  about  that  because  W.  P.  B. 
goes  in  there  with  its  committee  to  determine  which  have  priorities. 

Senator  Wallgren.  Do  you  have  any  pressure  leveled  on  you  by 
operators  to  try  to  have  an  area  made  a  critical  area  ? 

Governor  McNutt.  I  have  pressure  leveled  at  me  and  upon  me  by 
most  anybodv  who  is  connected  with  the  war  effort. 

Senator  Wallgren.  But 

Senator  Connally.  Governor,  if  you  didn't  you  wouldn't  amount 
to  a  damn  ;  everybody  that  amounts  to  anything  has  pressure  on  them* 
of  course. 

Governor  McNutt.  I  am  not  complaining. 

Senator  Connally.  If  you  want  a  job  without  pressure  you  had 
better  not  stay  around  Washington. 

Senator  Wallgren.  I  have  a  feeling  that  there  are  a  great  many 
plants  that  will  do  everything  in  their  power  to  have  an  area  declared 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8565 

a  critical  area  for  their  own  good.  I  would  like  to  have  you  elaborate 
on  that  just  a  little  bit  more  as  to  whether  or  not  you  think  that  is 
true. 

Governor  McNutt.  I  have  seen  no  indication  of  that,  Senator. 

Senator  Wallgren.  I  am  wondering  just  how  keenly  interested 
North  American  might  have  been  in  seeing  that  that  area  be  classified 
as  a  critical  area. 

Governor  McNutt.  They  must  have  known  that  they  would  pay  part 
of  that  price  themselves. 

Senator  Wallgren.  How  could  they  when  they 

Governor  McNutt.  They  can  put  in  their  priorities  committee  there 
and  determine  who  can  have — who  needs  labor.  The  determination  is 
made  as  between  plants.  There  are  some  other  aircraft  there,  too,  as 
you  know. 

Senator  Ferguson.  They  are  small.  The  Lockheed  modification 
is  small,  TOO  people. 

Senator  Wallgren.  They  have  7  percent  of  the  whole  load  over 
there. 

Senator  Ferguson.  Lockheed  has  750  employees  and  they  don't  need 
any  more,  was  the  testimony. 

Senator  Wallgren.  Governor,  do  you  know  there  wasn't  another 
company  in  that  whole  list  that  needed  more  than  five  or  six  hundred 
men  in  the  Dallas  area  ? 

Governor  McNutt.  Lockheed  was  2,387,  Senator;  that  was  their 
employment  on  September  1;  Southern  Aircraft,  1,775. 

Senator  Wallgren.  As  far  as  Lockheed  is  concerned  that  is  not 
their  future  needs  at  all. 

Senator  Ferguson.  There  is  something  wrong  with  those  figures. 

Mr.  Fulton.  Mr.  McNutt,  you  are  giving  the  committee  their  em- 
ployment, not  the  figures  of  their  future  needs ;  I  think,  Senator  Wall- 
gren and  Senator  Ferguson  were  referring  to  future  needs,  which  in 
no  case  exceeded  more  than  a  few  hundred. 

Governor  McNutt.  Here,  according  to  them,  was  their  labor  de- 
mand: North  American  18,885;  Lockheed,  1,300.  That  was  what 
they  asked  us  for.  Continental  Motors,  130;  Firestone,  35;  Murray 
Co.,  300;  the  Gilbertson  Oil  Heater  Co.,  167;  and  the  others  in  that 
area  that  we  make  the  rounds  of,  all  these  employers,  they  are  not 
confined  to  the  war  plants,  as  you  well  know ;  we  have  to  furnish  those 
who  are  engaged  in  essential  civilian  activities  as  well. 

Senator  Wallgren.  But  no  other  contractor  asked  for  more  than 
500. 

Governor  McNutt.  The  total  of  these  others  amounted  to  2,578. 
aside  from  those  that  I  have  listed  to  you. 

Senator  Wallgren.  That  is  against  18,000? 

Governor  McNutt.  We  cut  the  18,0G0  of  our  own  motion  to  ten, 
almost  in  two. 

Senator  Ferguson.  How  could  you  do  that  if  they  actually  needed 
them? 

Governor  McNutt.  Couldn't  if  they  actually  needed  them ;  that  was 
the  estimate  we  made  of  it. 

Senator  Ferguson.  Now,  let's  take  that.  How  could  you  possibly 
do  that  ?  What  authority  had  you  to  do  that  if  this  airplane  industry, 
which  today  is  the  most  vital  in  America — these  are  large  bombers — 
how  would  you  cut  it  ? 


8566     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Governor  McNutt.  We  would  do  it  as  a  very  practical  matter  be- 
cause their  rate  of  hiring  had  not  been  that. 

Senator  Ferguson.  Then  you  didn't  believe  them  ? 

Governor  McNutt.  Of  course,  we  didn't. 

Senator  Ferguson.  But  did  you  go  into  see  how  much  you  didn't 
believe  them  ? 

Governor  McNutt.  No. 

Senator  Ferguson.  You  say  you  didn't  believe  them  down  to  10,000. 
Did  you  make  an  analysis  as  has  been  done  by  Mr.  Wilson,  showing 
you  that  they  didn't  need  any  in  fact,  except  a  few  replacements  only1? 

Governor  McNutt.  Let's  get  back  to  what  Mr.  Wilson  said,  that 
they  had  changed  their  schedules  and  that  they  had  found  out  that 
their  training  was  being  done  better  than  they  had  anticipated. 

Senator  Ferguson.  Governor,  isn't  it  true  they  changed  their  sched- 
ules because  they  were  only  producing  a  sixth  ? 

Governor  McNutt.  There  is  nothing  in  Mr.  Wilson's  wire  that 
would  indicate  that.  His  wire  indicates  to  me  there  is  a  change  in  air- 
plane schedules  the  country  over. 

Senator  Wallgren.  It  is  this  particular  plant, -Governor;  there  is 
no  production  there  yet;  we  expect  there  will  be  because 

Governor  McNutt.  Yes ;  they  are  scheduled  this  month  for  so  many 
bombers  and  fighter  planes  and  that  goes  up  to  over  so  many  in 
March. 

Senator  Wallgren.  That  is  not  very  many  when  you  consider  the 
job  being  done  by  other  plane  plants  throughout  the  country,  so  they 
will  not  at  all  have  reached  their  peak,  even  this  month,  and  they 
won't  for  some  time. 

Governor  McNutt.  I  understand — — 

Senator  Ferguson.  Governor,  do  you  want  those  figures  on  the 
record  ? 

Governor  McNutt.  No. 

The  Chairman.  Leave  the  figures  out. 

Senator  Ferguson.  We  haven't  been  able  to  use  figures. 

Senator  Ball.  Governor,  when  you  get  these  estimates  of  manpower 
needs  from  the  employer,  do  you  check  them  with  the  representatives 
of  procurement  agency  stationed  in  that  plant  ? 

Governor  McNutt.  That  is  right. 

Senator  Ball.  Do  those  representaitves  ever  disagree  with  the  fig- 
ures presented  by  the  management  ? 

Governor  McNutt.  I  suppose  they  do..  It  would  not  be  natural  if 
they  didn't  disagree  occasionally. 

Senator  Ball.  Here  is  what  I  am  getting  at.  It  seems  to  me  your 
big  difficulty  in  this  whole  picture  is  that  you  get  an  employer  with  a 
contract  and  you  get  a  representative  of  the  procurement  agency  who 
is  given  the  responsibility  of  seeing  insofar  as  he  can  that  that  par- 
ticular contract  is  fulfilled ;  the  whole  tendency  of  those  two  men  is 
to  see  that  they  get  everything  they  need.  They  are  concentrating  on 
their  own  little  sector. 

Governor  McNutt.  That  is  right. 

Senator  Ball.  And  the  over-all  picture  doesn't  worry  him  very 
much.    That  is  your  responsibility. 

Governor  McNutt.  That  is  right,  it  worries  me;  it  doesn't  worry 
them. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8567 

Senator  Ball.  How  can  you — what  have  you  to  recommend  to  this 
committee  as  a  way  of  overcoming  that  tendency  of  the  individual, 
the  employer  and  the  representative  of  the  procurement  agency  out 
in  the  field  in  charge  of  a  particular  contract  to  put  the  performance 
of  that  contract  above  everything  else  and  as  a  result  not  give  enough 
attention  to  the  over-all  war  picture  and  when  the  employer  tells 
him  now,  "Yes,  I  know  I  am  not  using  these  men  now,  but  I  may 
need  them  2  weeks  from  now,"  and  the  procurement  agency  man  goes 
along  with  him.  We  know  that  has  happened;  we  have  seen  it  in 
too  many  plants. 

Governor  McNutt.  I  know  it  has  happened,  too,  but  I  doubt  very 
much  if  even  the  Truman  committee  can  change  human  nature. 

The  Chairman.  We  are  not  trying  to  do  that. 

Governor  McNutt.  It  is  human  nature  to  do  exactly  what  you  have 
said. 

Senator  Ball.  What  kind  of  procedure  can  alleviate  that  situation 
some?  We  were  convinced  from  what  we  have  seen  in  these  plants 
that  if  you  had  efficient  utilization  of  existing  manpower  your  prob- 
lem would  be  at  least  two-thirds  solved. 

Governor  McNutt.  Not  so  sure  it  would  be  solved,  but  a  good  deal 
easier. 

Senator  Ball.  What  have  you  to  recommend? 

Governor  McNutt.  Furthermore  putting  a  place  in  group  1  has  in 
many  instances  brought  a  community  to  realize  that  and  the  com- 
munity pressures  themselves  have  brought  about  changes.  Now  the 
most  notable  example — and  I  wish  the  committee  would  look  at  it — 
is  the  one  at  Dayton. 

Senator  Ferguson.  I  have  read  the  history  of  the  Dayton  one. 

Governor  McNutt.  The  community  itself  did  that.  I  think  the 
same  thing  is  going  to  happen  in  Indianapolis. 

Seator  Ferguson.  When  we  analyzed  Dayton  it  wasn't  the  Army 
that  caused  the  critical  area;  wasn't  it  Wright  Field  and  Patterson 
Field  that  caused  that  critical  area,  and  therefore 

Governor  McNutt.  It  contributed ;  it  was  not  the  sole  reason. 

Senator  Ferguson.  I  spent  some  days  there  and  if  it  wasn't  the  sole, 
it  was  close  to  the  sole  reason. 

Senator  Ball.  Governor,  to  get  back  to  my  question,  is  there  any- 
thing you  can  recommend  to  this  committee,  any  change  in  this 
procedure  and  authority  that  would  tend  to  alleviate  that  situation 
and  make  this  over-all  picture  the  primary  factor,  rather  than  the 
individual's  desire  to  make  a  good  record  for  himself? 

Governor  McNutt.  Get  me  the  machinery  with  which  to  work.  I 
would  be  very  happy  to  undertake  it.  After  all,  we  are  really  the 
hired  man  here.  We  are  the  ones  who  take  the  orders  to  go  out  and 
get  the  men. 

Senator  Wallgren.  Governor,  you  know  this  committee's  job  is 
that  of  trying  to  save  the  Government  a  little  bit  of  money  and  trying 
to  prevent  waste.  This  one  particular  instance  here  now,  10,000  men 
to  be  taken  out  of  that  plant  at  an  average  of  $50  a  week  is  a  saving 
of  half  a  million  dollars  a  week  to  the  Nation.  I  think  this  thing 
could  be  done  all  over  the  United  States.  We  might  need  a  little 
help  from  you. 


8568     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Governor  McNutt.  And  I  will  need  a  little  help  from  you,  and 
also  Appropriations  Committee  of  the  House  and  likewise  of  the 
Senate. 

The  Chairman.  Senator  Lucas,  do  you  have  a  question? 

Senator  Lucas.  I  just  wanted  to  ask  one  question.  In  this  North 
American  plant  who  in  reality  is  responsible  in  the  first  instance  for 
this  labor  proportion? 

Governor  McNutt.  The  management. 

Senator  Lucas.  The  management  of  the  North  American  plant. 

Governor  McNutt.  That  is  right. 

Senator  Lucas.  Now  what  can  the  committee  or  Congress  do  to 
discourage  the  hoarding  of  labor  in  these  plants?  That  seems  to  me 
to  be  the  base  of  the  whole  thing. 

Senator  Wallgren.  Senator,  the  point  of  it  is  this,  that  the  North 
American  Aviation  plant  has  done  up  to  now  a  very  fine  job. 

Senator  Lucas.  Not  from  what  I  have  heard  here  this  morning. 

Senator  Wallgren.  I  am  speaking  about  the  one  in  California. 
Now  they  are  asking — when  Mr.  Kindelberger,  the  operator,  the  man- 
ager of  this  plant,  the  owner  of  it,  rather,  when  he  was  on  the  witness 
stand  before  us  in  Dallas,  when  I  asked  him  the  question  of  how 
many  people  he  employed  when  he  first  manufactured  planes  under 
a  contract  in  1936,  he  said  90  people.  Today  his  plant  in  California 
has  approximately  30,000  and  they  are  asking  for  approximately 
40,000  at  Dallas.  That  gives  you  some  idea  of  how  the  industry  is 
blown  up. 

Senator  Lucas.  How  many  do  they  need  at  Dallas  ? 

Senator  Wallgren.  Apparently  now  the  figure  can  be  scaled  down 
to  approximately  30,000. 

Governor  McNutt.  And  apparently  the  number  of  planes  has  been 
scaled  down,  too. 

Senator  Wallgren.  They  have  scaled  down  the  number  of  planes 
because  they  haven't  been  able  to  meet  the  schedule  that  had  been 
set  for  them. 

Senator  Ferguson.  What  is  the  use  of  putting  up  a  scale  when  there 
is  no  intention 

Governor  McNutt.  I  don't  do  that. 

Senator  Ferguson.  The  company  does. 

Governor  McNutt.  When  the  production  scale  is  laid  out  by  W. 
P.  B. 

Senator  Lucas.  What  I  am  complaining  about  here  is  a  question, 
is  it  a  fact  that  anyone  in  this  country  that  needs  only  30,000  men 

in  a  plant  asks  for  40,000 

Senator  Ferguson.  48,000. 

Senator  Lucas.  Now,  that  individual,  there  is  something  funda- 
mentally and  basically  wrong  with  the  fellow  who  will  make  that 
kind  of  request  when  we  are  all  out  in  this  war  effort  to  do  whatever 
each  individual  can  do  to  win  it  at  the  earliest  possible  time. 

The  Chairman.  I  think  he  was  doing  just  what  we  all  do;  if  we 
find  there  is  a  shortage  of  shirts  we  order  10  dozen  when  we  can  get 
along  with  10,  and  I  think  he  ordered  48,000  people  when  he  VnPTTT 
he  needed  38,000  and  he  would  only  get  that  many. 

Senator  Ferguson.  In  this  particular  case  I  think  part  of  it  was 
caused  by  this:  They  put  in  as  a  personnel  man  to  determine  the 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8569 

amount  of  labor  they  needed  a  man  who  had  had  no  experience,  and 
this  is  not  critical  of  this  particular  man,  but  he  had  been  a  first-aid 
assistant  until  he  took  this  responsible  job-  He  was  not  checked  by 
any  responsible  agency ;  he  had  a  cost-plus  contract ;  the  Army  didn't 
check  him ;  they  weren't  interested  in  it ;  they  are  interested  in  produc- 
tion. If  he  says  he  wants  48,  so  what ;  give  it  to  him,  there  are  a  lot 
of  men.  That  is  what  happened  here.  There  is  no  responsible 
agency  of  government,  and  I  think  we  found  this  from  the  testimony 
because  we  went  down  there  and  actually  took  the  testimony,  to  insist 
on  not  hoarding  labor. 

Now,  this  particular  case  demonstrated  this,  that  the  union,  the 
C.  I.  O.  union,  came  in  and  testified  that  they  were  not  producing. 
The  people  had  been  critical  of  the  union.  The  slow-downs,  and  so 
forth,  caused  criticism,  but  here  was  the  union  testifying  that  they 
were  not  producing  more  than  50  percent;  in  fact,  the  engineer,  the 
superintendent  of  the  plant,  said  that  they  were  25  percent  efficient 
in  that  plant  and  that  testimony  could  be  obtained  by  the  Army  and 
Navy  and  anyone  who  took  it. 

Senator  Lucas.  I  want  to  ask  this.  I  don't  quite  agree  with  the 
Senator's  explanation  on  the  shirt  deal.  These  people  have  these  huge 
contracts,  making  implements  of  war,  and  if  they  were  designedly  and 
deliberately  and  knowingly  hoarding  men,  in  my  humble  opinion  they 
were  just  chiseling  and  cheating  in  a  serious  crisis  here,  and  it  is  some- 
thing that  apparently  no  one  can  stop  unless  you  have  a  lot  of  men, 
as  the  Governor  says,  to  go  here  and  there  and  check  these  men  con- 
stantly. Now,  it  would  seem  to  me  that  possibly  a  penalty  of  some 
kind  for  hoarding  labor  from  the  Congress  might  have  some  effect 
upon  these  fellows  in  the  first  instance. 

Senator  Ferguson.  Don't  you  think  it  would  be  a  good  thing  now 
and  then  to  take  the  contract  away  from  them  ?  In  this  case  the  Gov- 
ernment owns  that  entire  plant  and  every  particle  of  machinery. 

Senator  Lucas.  We  are  complaining  bitterly  here  of  Government 
officials  who  fail  to  check  and  recheck,  and  that  is  all  right,  but  we  are 
not,  in  my  humble  opinion,  placing  enough  emphasis  upon  the  fellow 
in  the  first  instance  who  willfully  and  knowingly  and  designedly 
Iioards  this  labor,  and  we  are  supposed  to  go  along  with  this  program 
the  same  as  anybody  else. 

Senator  Wallgren.  The  Government  found  it  necessary  to  have  to 
go  out  and  get  these  men  to  do  the  job  for  them ;  they  are  the  only  men 
that  know  how  to  build  these  planes ;  a  lot  of  these  men  don't  want  to 
take  on  another  plant ;  a  lot  of  them  haven't  wanted  to  see  the  industry 
blown  up  to  the  proportions  it  is,  but  the  Government  and  Army  comes 
along  and  says,  "We  have  to  have  10,000  of  this  and  50,000  of  that." 

Senator  Ferguson.  But,  Senator,  you  would  see  crocodile  tears  if 
you  ever  took  any  of  these  contracts  away  from  them. 

Senator  Wallgren.  After  they  get  rolling  once,  yes;  but  at  the 
outset  most  of  them  are  a  little  skeptical  about  whether  they  can  put 
the  program  across. 

The  Chairman.  We  have  here  today  a  distinguished  visitor  from  the 
"Hriuse  of  Representatives,  the  chairman  of  the  Judiciary  Committee 
of  the  House  (Congressman  Sumners  of  Texas),  who  is  also  the  Con- 
gressman from  the  Dallas  district.     I  will  extend  the  courtesy  to 
liim  of  any  questions  he  desires  to  ask. 

311932 — 44— pt.  21 5 


8570     INVESTIGATION    OF   THE    NATIONAL   DEFENSE    PROGRAM 

Representative  Sumners.  It  is  pretty  fine  to  get  this  sort  of  recog- 
nition any  time.  Governor,  you  will  excuse  me  if  I  get  into  the 
record,  because  it  will  read  pretty  good  down  home,  you  know. 

Governor  McNtjtt.  You  always  read  well,  any  place,  any  time. 

Representative  Sumners.  I  was  home  during  the  time  the  Truman 
Committee  was  there  and  I  have  been  making  some  independent  inves- 
tigation of  that  whole  picture  and  it  seemed  to  be  very  important 
not  only  with  regard  to  the  Dallas  situation  but  in  regard  to  the 
over-all  picture.  If  I  may  indicate,  I  think  this  whole  situation  in 
Dallas  has  some  pretty  deep  roots.  In  the  first  place  we  seem  to  be 
losing  consciousness  of  realization  in  this  country  of  the  fact  that  we 
are  fighting  a  war,  really  fighting  a  war;  that  everything  we  have 
is  involved  and  probably  we  are  a  long  way  from  the  victory. 

Now,  you  don't  find  anything  in  those  plants  of  the  spirit,  as  far 
as  I  could  discover,  speaking  generally,  to  indicate  that  those  men 
realize  that  they  are  engaged  in  a  battle  where  much  happens  to  deter- 
mine the  final  victory.  I  didn't  find  it  in  the  community.  The  sec- 
ond thing  is  that  there  is  still  a  notion  in  the  country  that  Uncle  Sam 
has  a  bottomless  pocket.  Young  folks  come  into  those  plants  and 
get  two  or  three  times  as  much  money  as  they  got  at  home ;  they  come 
in  there  with  a  notion  they  are  going  to  sacrifice,  they  have  some  kin- 
folks  fighting  and  they  want  to  make  a  contribution.  But  that  is 
what  they  find  when  they  get  there,  and  more  money  than  they  ever 
got  anywhere  else,  and  they  are  put  through  a  period  of  training  at 
public  expense,  doing  nothing  largely,  just  sort  of  standing  around. 

That  is  what  they  tell  me.  I  think  this  cushion  is  a  very  bad 
thing.  I  recognize  they  have  to  have  some  people,  but  this  cushion 
means  a  lot  of  people  standing  around  doing  nothing,  waiting  until 
they  get  ready  to  work  them.  The  moral  effect,  the  effect  upon  the 
morale  of  those  people  of  those  two  influences  is  tremendous  in  these 
plants  and  if  that  operates  everywhere  like  it  operates  there,  I  don't 
know  what  can  be  done  about  it,  but  it  is  a  tremendously  important 
thing. 

With  regard  to  these  small  plants,  there  is  where  this  pinch  is  com- 
ing because  North  American  I  was  told  have  enough  contracts  to  carry 
through  this  year  and  next  year.  Now  these  small  plants,  Governor — 
and  this  is  a  practical  observation,  and  probably  it  has  occurred  to 
many  people — that  can  produce  war  materials  are  close  to  the  centers 
of  population.  There  is  no  transportation  problem  that  is  difficult; 
there  is  no  waste  of  time  in  getting  back  and  forth  to  the  place  where 
they  work,  like  there  is  if  the  people  have  to  go  to  the  North  American, 
to  the  big  plant. 

There  they  have  to  go  these  many  miles  on  congested  roads,  or 
they  have  to  live  in  a  shack,  or  have  no  place  to  live.  But  these  people 
around  these  small  places  in  the  center  of  population  don't  have  any 
of  those  problems.  Now  as  far  as  that  could  be  done,  I  am  making  this 
statement  in  general  and  it  is  not  at  all  in  reference  to  your  particular 
job,  to  whatever  degree  we  can  utilize  these  little  plants  where  they 
already  have  the  population,  if  a  man  could  go  three  or  four  blocks  or 
maybe  a  half  mile  or  2  miles  to  work  in  a  plant  located  in  Dallas 
and  couldn't  make  that  10,  15,  or  20  miles  over  to  this  plant  and  back, 
those  are  the  over-all  observations  I  want  to  express. 

I  also  want  to  express  my  appreciation  for  the  effort  that  is  being 
made  by  this  committee  and  for  what  I  understand  is  to  be  the  deter- 


INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM     8571 

mination  in  regard  to  that,  but  those  observations  I  have  just  made  I 
believe  are  pretty  important  in  this  general  over-all  picture. 

Governor  McNutt.  We  have  urged  these  larger  plants  to  sublet  as 
many  of  the  contracts  as  they  can  to  relieve  the  situation  in  the  larger 
plant. 

Senator  Ferguson.  Governor,  we  have  been  talking  about  efficiency 
this  morning.  Do  you  think  this  will  add  to  the  efficiency?  It  has 
just  been  reported  that  all  aircraft  workers  will  be  automatically  de- 
ferred from  the  draft  ?     Do  you  think  that  will  add  to  our  efficiency  ? 

Governor  McNutt.  If  that  report  has  been  made  it  is  not  true. 

Senator  Ferguson.  You  know  nothing  about  that  report  ? 

Governor  McNutt.  I  know  only  the  telegram  that  is  being  sent  out, 
I  think,  today,  in  connection  with  the  west  coast. 

Senator  Ferguson.  What  area  will  they  be  released  or  deferred 
under  the  draft  ? 

Governor  McNutt.  That  will  be  on  the  west  coast,  but  it  is  not  really 
an  automatic  deferment. 

Senator  Ferguson.  What  will  it  be?     What  is  the  ruling? 

Governor  McNutt.  I  should  not  like  to  quote  what  I  happen  to 
know  is  coming  from  Mr.  Justice  Byrne's  office  until  it  becomes  a 
public  record. 

Senator  Ferguson.  It  is  not  out  of  your  department?  Your  de- 
partment had  nothing  to  do  with  it? 

Governor  McNutt.  It  came  from  Justice  Byrnes. 

Senator  Ferguson.  Governor,  do  you  have  the  figures  on  the  Texas 
situation,  the  whole  Texas  set-up? 

Governor  McNutt.  I  can  get  those  figures  for  you. 

Senator  Ferguson.  Would  you  put  that  into  the  record? 

Governor  McNutt.  I  would  be  very  glad  to. 

Senator  Ferguson.  That  may  have  something  to  do  with  this 
particular  area,  so  if  we  might  have  the  figures  on  the  demands  and 
the  amount  employed  in  the  various  places.  This  is  a  west  coast 
deferment.     It  wouldn't  cover  the  Detroit  area  or  Dallas  area  ? 

Governor  McNutt.  It  doesn't  even  cover  Boeing,  Wichita,  although 
I  have  a  request  there  for  a  stay  of  induction  from  the  Under  Secre- 
tary of  War. 

Senator  Ferguson.  Do  you  know,  Governor,  how  the  deferments 
are  given?  For  instance,  in  Dallas?  Do  you  know  this  is  the  rule 
that  if  the  company  wants  deferment  of  a  single  man,  let  us  say  a 
young  fellow  of  22,  they  merely  fill  in  a  form,  saying  why  they  need 
him,  and  so  forth,  and  send  it  to  your  department;  you  stamp  it 
in  your  Austin  office  "Deferred  man,"  and  then  it  goes  to  the  board 
and  they  automatically  just  as  a  matter  of  course  on  most  boards 
grant  that  deferment? 

Governor  McNutt.  In  our  talking,  Senator,  about  the  replacement 
schedule,  we  think  in  order  to  help  this  situation  out  so  that  a  single 
plant  wouldn't  be  hard-hit,  we  have  asked  them  all  to  schedule  how 
the  man  can  leave  in  order  to  meet  the  demands  of  the  armed  forces. 
Now  it  has  been  mutually  satisfactory.  The  local  board  is  still 
autonomous  but  they  have  allowed  that.' 

Senator  Ferguson.  They  have  practically  abandoned  their  right, 
isn't  that  true?  S    ' 

Governor  McNutt.  No,  no. 


8572     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

Senator  Ferguson.  We  took  testimony  there  in  Dallas  and  found 
it  to  be  true. 

Governor  McNutt.  They  recognize  the  reasonableness  of  this  pro- 
cedure. We  have  worked  on  these  replacement  schedules  in  order 
to  bring  about  an  orderly  withdrawal  from  industry.  In  other  words, 
the  demands  of  the  armed  forces  would  not  seriously  hamper  our 
production  effort  this  way.  That  is  the  whole  purpose  of  it,  and 
on  the  whole  it  has  worked  out  very  satisfactorily  on  the  part  of 
all  concerned. 

Senator  Ferguson.  I  have  only  one  more  question  and  that  is  on 
the  so-called  30-days  from  one  employment  to  another. 

Governor  McNutt.  It  is  60  days  now. 

Senator  Ferguson.  Now,  isn't  it  true  out  on  the  west  coast  you 
could  buy  these  forms  in  stationery  stores  and  that  they  were  forging 
them? 

Governor  McNutt.  I  suppose  things  of  that  kind  will  happen. 
First  of  all,  we  couldn't  ask 

Senator  Ferguson.  Do  you  know  of  any  prosecution  on  those  ? 

Governor  McNutt.  I  don't  know  that  there  have  been,  but  there 
is  no  reason  why  there  shouldn't  be,  because  they  do  not 

Senator  Ferguson.  You  think  your  department  ought  to  look  into 
that? 

Governor  McNutt.  That  is  right,  but  we  have  no  legal  staff  that 
would  permit  us  to  do  that. 

Senator  Ferguson.  Couldn't  the  Department  of  Justice  do  it? 

Governor  McNutt.  They  might  be  able  to  do  it;  we  can  place 
those  before  them. 

Senator  Ferguson.  I  would  like  sometime  for  you  to  give  the  com- 
mittee a  report  on  that.     Now  it  is  60  days. 

The  Chairman.  The  committee  will  stand  recessed  until  the  call 
of  the  Chairman. 

Governor  McNutt.  Thank  you  very  much,  Mr.  Chairman  and 
gentlemen. 

(Whereupon  at  12:30  o'clock  the  committee  recessed  until  the  call 
of  the  chairman.) 


INVESTIGATION  OF  NATIONAL  DEFENSE  PEOGKAM 


FRIDAY,   NOVEMBER   19,    1943 

United  States  Senate, 
Special.  Committee  Investigating 

the  National  Defense  Program, 

Washington,  D.  G. 
The  committee  met  at  10 :  10  a.  m.,  pursuant  to  the  call  of  the 
chairman,  in  room  318,  Senate  Office  Building,  Washington,  D.  C, 
Senator  Harry  S.  Truman,  presiding. 

Present:  Senators  Harry  S.  Truman,  (chairman);  Mon  C.  Wall- 
gren,  Joseph  H.  Ball,  Carl  Hatch,  Harley  M.  Kilgore,  Homer  Fer- 
guson. 

Also  present :  Hugh  Fulton,  chief  counsel ;  Kudolph  Halley,  execu- 
tive assistant  to  chief  counsel. 

The  Chairman.  The  committee  will  come  to  order.  Mr.»Wilson,  if 
you  will,  please  take  the  witness  chair. 

TESTIMONY  OF  CHARLES  E,  WILSON,  EXECUTIVE  VICE  CHAIRMAN, 
WAR  PRODUCTION  BOARD 

The  Chairman.  We  are  particularly  interested  in  getting  funda- 
mental information  on  the  last  report  which  the  committee  made  on 
reconversion.1  We  are  particularly  interested  in  manpower  and  the 
use  of  Government  machinery  in  the  plants  as  they  now  exist, 
whether  they  can  be  used  or  not.  If  you  care  to  discuss  some  of 
those  questions  with  us  this  morning,  we  should  be  glad  to  hear  from 

Mr.  Wilson.  Manpower  in  any  particular  industry  or  generally? 

The  Chairman.  Generally,  as  you  have  seen  it,  particularly  in  the 
aircraft  industry,  with  which  you  are  familiar. 

Mr.  Wilson.  I  think  the  utilization  of  manpower  in  the  aircraft 
industry,  Senator,  is  becoming  very  much  better  than  it  has  been,  and 
I  believe  there  has  been  a  very  distinct  improvement..  Industry  is 
getting  past  that  stage  of  almost  an  infant  industry  into  the  mass 
production  phase,  and  is  doing  a  distinctly  better  job  in  utilizing 
the  manpower  that  they  have  in  place. 

The  industry  generally  has  revised  its  estimates  of  its  additional 
manpower  requirements ;  as  a  matter  of  fact — this  is  speaking  rather 
generally  now — -has  stated  that  the  manpower  in  place  in  most  cases 
will  be  ample  to  meet  the  substantially  increasing  output  require- 
ments.   It  is  true,  as  you  know,  that  quite  a  number  of  the  air  frame 

1  Senate  Report  No.  10,  Part  12,  Seventy-eighth  Congress,  first  session,  "Outlines  of  Prob- 
lems of  Conversion  from  War  Production." 

8573 


8574     INVESTIGATION    OF   THE    NATIONAL   DEFENSE    PROGRAM 

plants  still  have  substantially  increasing  schedules,  but  nevertheless 
they  believe  now  that  they  will  be  able  to  meet  those  schedules  with 
only  minor  additions  to  their  labor  forces.  So  I  believe  there  is 
much  evidence  that  that  great  industry  is  more  or  less  becoming  of 
age  now,  when  we  can  look  for  very  much  better  manpower  utilization 
within  it. 

Mr.  Fulton.  Mr.  Wilson,  have  you  found  in  effect  that  after  this 
North  American  Dallas  plant  investigation  of  yours  and  the  commit- 
tee,1 they  are  a  little  more  willing  to  look  to  see  whether  they  can 
actually  get  more  out  of  the  people  they  have  before  going  out  to 
hire  more  ? 

Mr.  Wilson.  Yes;  yes;  they  do,  Mr.  Fulton.  They  show  entire 
willingness  now  to  study  the  manpower  utilization  situation  within 
their  individual  plants  very  thoroughly,  and  they  are  cooperating 
fully  with  us  to  try  to  bring  about  improvements. 

Mr.  Fulton.  Is  the  War  Department  cooperating  with  you  along 
the  same  line  ? 

Mr.  Wilson.  Yes.  We  are  using  there  particularly  now  the  Army 
Air  Forces  people  and,  indeed,  have  plans  for  improving  the  coopera- 
tion. We  are  going  to  give  the  Army  Air  Forces  men  who  are  in 
these  individual  plants  an  intensive  training  course,  if  you  could  call  it 
that,  so  that  they  may  know  what  to  look  for,  try  to  discover  any 
weaknesses  that  still  remain,  and,  from  everything  I  have  seen,  they 
are  assured  of  the  hearty  cooperation  of  the  manufacturers  in  making 
further  improvements. 

Senator  Ferguson.  Mr.  Wilson,  in  the  past  it  was  one  of  the 
defects,  was  it  not,  that  they  didn't  know  or  couldn't  find  this  hoard- 
ing ;  that  is,  as  far  as  the  Army  was  concerned  ? 

Mr.  Wilson.  Yes;  there  was  very  considerable  confusion  on  that 
point,  Senator,  and  I  think  the  air  frame  manufacturers  believe 
that  they  really  need  more  additional  labor  than  actually  they  do 
need.  I  think  in  fairness  to  that  industry  we  have  to  remember  that 
they  have  gone  from  what  amounts  to  the  job-shop  type  of  manu- 
facture to  a  tremendous  mass-production  business  in  a  relatively 
short  time,  just  a  few  years,  and  the  confusion  of  their  needs,  I  be- 
lieve, has  been  added  to  by  the  fact  that  it  is  also  true  that,  in  the 
period  when  they  should  have  been  studying  more  efficient  methods  of 
manufacture,  they  have  been  beset  by  all  kinds  of  demands  for 
changes  that  really  were  confusing  and  disturbing  to  them,  which 
changes,  incidentally,  as  they  have  been  investigated,  were  entirely 
in  order  from  the  standpoint  of  military  demands.  Yet  they  were 
very  upsetting  to  a  shop,  to  have  to  change  all  their  tools  and 
methods,  and  so  on,  in  order  to  conform  to  the  desires  of  the  military. 

So  it  has  been  a  difficult  time  for  them.  That  has  straightened 
out  to  a  very  large  degree  recently,  and  I  believe  it  is  a  fair  statement 
that  the  industry  is  now  cooperating  very  fully,  is  alive  to  the  pos- 
sibility of  the  opportunity  to  reduce  the  labor  on  many  types  of 
planes,  and  I  believe  that  the  production  results  are  proving  it.  Their 
reduced  demands  for  labor  are  further  proof  of  it,  and  I  believe  that 
the  reduced  man-hours  for  air  frames  of  various  types  over  the  course 
of  the  next  few  months  will  give  a  very  definite  demonstration  of  the 
improvements  that  have  been  made. 

1  See  supra,  pp.  8845-8572. 


INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM     8575 

Senator  Ball.  Mr.  Wilson,  I  recall  reading  a  report — I  think  it 
was  in  The  Washington  Merry- Go -Round — that  after  you  had  or- 
dered the  request  of  the  Dallas  North  American  plant  for  9,000  addi- 
tional employees  turned  down,  the  War  Department  overruled  you. 
Just  for  the  record,  Is  that  true  or  not? 

Mr.  Wilson.  No;  the  War  Department  didn't  overrule  the  change 
that  was  made  there ;  that  is,  the  change  in  the  number  of  people  that 
North  American  had  previously  said  they  needed;  and  we  had,  in 
Dallas,  arrived  at  an  agreement  that  they  did  not  need  that  number 
of  men.  The  War  Department  did  not  overrule  that.  There  were 
those  in  the  War  Department,  I  believe,  who  were  still  insistent  that 
the  industry  did  need  very  large  numbers  of  additional  workers.  Pos- 
sibly we  were  not  in  agreement,  but,  as  far  as  the  Army  Air  Forces 
were  concerned,  which  is  really  the  instrumentality  of  the  War  Depart- 
ment with  whom  we  deal  in  matters  of  that  kind,  they  were  in  entire 
agreement  with  us  that  great  improvement  could  be  effected,  and  they 
have  cooperated  with  us. 

Senator  Ball.  Does  your  decision  cutting  back  their  manpower  re- 
quirements stand  ? 

Mr.  Wilson.  It  stands,  absolutely ;  yes,  sir. 

Mr.  Fulton.  Mr.  Wilson,  do  3^011  have  any  figures  on  the  amount  of 
the  reduction  in  manpower  that  has  been  made  by,  say,  the  west  coast 
since  this  Dallas  investigation? 

Mr.  Wilson.  I  haven't  the  exact  figures  because  they  have  been  chal- 
lenged by  reason  of  the  changes  that  we  have  made  in  the  schedules. 
The  schedules  are  being  changed  up  and  down.  We  are  discontinuing 
the  manufacture  of  certain  planes ;  we  are  increasing  the  manufacture 
of  others.  This  scheduling  of  war  requirements  is  a  very  fluid  proposi- 
tion, as  you  know.  So,  with  these  changes,  we  have  had  to  go  back  and 
revise  all  the  figures. 

The  industry  is  cooperating  with  us.  As  a  matter  of  fact,  I  have  a 
group  out  on  the  Pacific  coast  now  where  over  50  percent  of  this  work 
is  concentrated,  again  going  over  their  manpower  requirements. 

I  am  unable  to  tell  you  what  the  reduction  in  the  number  of  people 
that  they  will  want  will  be,  but  I  can  say  this  to  you,  that  there  are 
enough  straws  in  the  wind  to  give  you  assurance  that  the  number  of 
people  that  they  formerly  thought  the}^  would  need  to  meet  the  sched- 
ules- will  be  substantially  reduced.  Indeed,  in  some  plants  they  prob- 
ably will  let  people  go. 

Mr.  Fulton.  When  you  referred  to  the  figures  being  challenged, 
you  meant  the  tentative  figures,  that  the  aircraft  industry  itself  revis- 
ing its  own  requests  had  been  challenged  by  the  Army  as  being  indica- 
tive that  they  needed  less  men  than  the  Army  thought  they  would  need. 

Mr.  Wilson.  Yes;  they  have  questioned  whether  the  figures  were 
right. 

Mr.  Fulton.  Why  doesn't  the  Army  press,  like  yourself,  for  a  vigor- 
ous reduction  ? 

Mr.  Wilson.  The  Army  Air  Forces — again  I 

Senator  Feeguson  (interposing).  I  notice  you  distinguish  between 
the  Army  and  the  Army  Air  Forces.    Why  is  that  ? 

Mr.  Wilson.  The  Army  Air  Forces,  of  course,  is  the  agency  most 
closely  associated  with  this  aircraft-production  problem;  but,  of 
course,  there  are  other  agencies  of  the  War  Department  who  apparently 
have  an  interest  in  the  problem  and,  as  a  matter  of  fact,  other  agencies 


8576     INVESTIGATION    OF    THE    NATIONAL    DEFENSE    PROGRAM 

of  the  War  Department  have  made  independent  studies  of  the  man- 
power requirements  of  aircraft  and  other  items.  It  was  one  of  those 
agencies  that  came  up  with  a  report  that  seemed  to  indicate  that  the 
original  figures,  the  original  estimates  of  the  increases,  of  what  the 
aircraft  manufacturers  would  need,  were  way  beyond  those  that  some 
of  us  more  closely  associated  with  the  aircraft  problem  could  subscribe 
to.  But,  dealing  with  the  Army  Air  Forces  group,  we  are  in  complete 
agreement  to  date  that  these  manpower  economies  can  be  effected. 

Senator  Ferguson.  Would  it  appear  at  the  present  time,  then,  that 
we  have  sufficient  manpower  in  the  particular  industry,  the  airplane 
industry,  to  operate  it? 

Mr.  Wilson.  We  have,  I  think,  for  the  next  month  or  2,  Senator, 
generally  speaking.    Now,  of  course,  this  is  a  far-flung  industry 

Senator  Ferguson  (interposing).  We  appreciate  that. 

Mr.  Wilson.  And  there  are  still  soft  spots.  There  are  certain  en- 
gine requirements  we  undoubtedly  will  have  to  speed  up,  and  the  only 
way  we  can  do  it  is  to  add  more  manpower,  but  that  is  a  matter  of 
comparatively  a  few  thousand  people.  In  one  or  two  air  frame  plants 
there  are  soft  spots,  and  we  will  have  to  add  a  few  thousand  people. 
But,  generally  speaking,  throughout  the  industry  we  have  the  man- 
power in  place  now  to  meet  the  present  so-called  W-8  schedule,  which 
is  a  very  substantial  schedule.  The  increases  beyond  the  manpower  in 
place  even  in  those  plants  will  come  only  when  the  production  schedules 
rise  substantially  sometime  in  1944,  if  those  schedules  are  maintained — 
I  mean  if  they  are  not  changed. 

PROBLEMS  OF  CONVERSION  FROM  WAR  PRODUCTION 

Senator  Ball.  Mr.  Wilson,  to  get  to  post-war  conversion,  which  is 
what  this  hearing  is  about,  have  you  any  rough  estimate  of  what  pro- 
portion of  the  air  frame  plants  producing  for  the  war  effort  are  owned 
by  the  Government,  by  one  agency  or  another  ? 

Mr.  Wilson.  I  couldn't  tell  you  the  figures.  The  new  plants,  which 
constitute  a  very  large  proportion  of  the  total,  are  owned  by  the 
Government. 

Senator  Ball.  Probably  over  half  of  the  production  is  coming  out 
of  the  Government- owned  plants  ? 

Mr.  Wilson.  I  would  estimate  that  that  is  so,  Senator. 

Senator  Ball.  Are  those  plants  so  constructed  that  they  can  be  used 
for  other  purposes  than  aircraft  production  ? 

Mr.  Wilson.  Oh,  yes ;  they  could  be  turned  into  other  types  of  man- 
ufacture. They  are  fine  plants,  for  the  most  part.  I  never  saw  better 
manufacturing  plants. 

Senator  Ball.  A  lot  of  the  machine  tools  could  also  be  used  for  other 
purposes  ? 

Mr.  Wilson.  Many,  many  of  the  machine  tools  are  reasonably  stand- 
ard machine  tools ;  yes,  sir. 

Senator  Ball.  Have  you  made  any  estimate  or  have  you  any  idea 
of  what  proportion  of  the  present  air  frame  production  is  likely  to  be 
possible  after  this  war  on  a  peacetime  basis? 

Mr.  Wilson.  I  have  never  made  an  estimate,  no,  Senator,  but  when 
you  get  up  to  an  output  of  9,000  planes  per  month,  and  then  compare 
that  with  our  production  of  transport  and  cargo  planes  prior  to  the 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8577 

war  period,  of  course,  it  can  be  at  best  only  a  comparatively  small  re- 
quirement for  peacetime  as  compared  with  today. 

Senator  Ball.  In  that  case  it  will  be  a  small  fraction  ? 

Mr.  Wilson.  I  should  think  so ;  yes. 

Senator  Ball.  Of  the  present  production. 

Mr.  Wilson.  I  should  think  so. 

Senator  Ball.  What  use,  then,  can  we  put  these  plants  to  after  the 
w7ar  ?    Have  you  any  idea  ? 

Mr.  Wilson.  My  guess  would  be  that  you  are  going  to  need  some  of 
these  plants  or  similar  plants  for  storage  purposes  after  the  war,  be- 
cause when  it  comes  to  the  reconversion  period,  I  don't  know  where 
you  are  going  to  get  warehouses  enough  to  store  up  the  raw  material 
and  the  semifinished  and  finished  stocks  that  will  be  on  hand  when  the 
day  comes,  unless  you  take  some  of  these  great  plants  and  have  plans 
in  advance  to  order  what  will  then  be  Government-owned  raw  material 
into  this  one  and  semifinished  parts  into  that  one,  and  finished  parts 
into  others.  I  think  you  are  going  to  need  a  great  many  of  them  to 
take  this  stuff  of  the  manufacturing  plants  of  the  country  that  you 
want  to  reconvert  to  peacetime  requirements  just  as  quickly  as  you  can. 

In  all  of  the  discussions  I  hear  about  reconversion,  there  seems  to  be 
very  little  consideration  given  to  how  you  are  going  to  empty  out  these 
plants  of  the  concerns  that  you  want  to  proceed  fast  in  order  to  put 
labor  to  work  in  post-war  days,  how  you  are  going  to  clear  them  out. 
I  think  that  is  a  tremendous  problem,  myself.     What  good  is  it  to 

say — 

Senator  Ferguson  (interposing) .  It  is  probably  the  first  thing;  isn't 
it? 

Mr.  Wilson.  I  think  so,  Senator.  It  is  one  thing  to  say  that  you 
will  pay  X  percent  under  a  termination  arrangement  with  somebody 
or  with  some  concern,  but  at  the  same  time  it  seems  to  me  you  had  better 
have  also  a  definite  determination  of  what  the  manufacturer  is  going 
to  do  with  that  stuff,  to  clear  it  out,  clear  out  his  factory,  clear  out  his 
machine  tools,  so  that  he  can  go  back  to  work  on  peacetime  goods  and 
use  peacetime  labor. 

I  think  probably  one  of  the  best  things  you  can  do  with  many  of 
these  factories  is  to  have  them  set  up  as  warehouses  for  this  tremendous 
volume  of  stuff  which  will  be  Government-owned.  Others  of  them 
undoubtedly  ought  to  be  set  up  as  emergency  plants  to  take  care  of  an- 
other emergency.  There  are  some  of  them  that  are  of  special  nature, 
and  all  that  undoubtedly  ought  to  be  retained  by  the  services  that 
have  bought  them,  against  the  day  you  may  need  them  again. 

Senator  Ball.  You  mean  you  think  some  of  the  primarily  combat 
plane  production  facilities  should  be  in  effect  Government  arsenals  ? 

Mr.  Wilson.  I  wasn't  thinking  of  that.  I  was  speaking  generally 
that  time.  I  don't  think  that  is  so  true  of  planes,  because  I  presume 
that  in  a  new  science  like  that  of  planes,  what  you  have  today  will 
probably  10  years  from  now  be  so  different  that  I  am  not  so  sure  that 
even,  the  plant  would  be  the  thing  you  would  want.  I  wasn't  think- 
ing of  planes.  I  was  thinking  of  such  items  as  magnesium  for  planes, 
where  you  have  Government-owned  facilities  today,  and  the  chances 
are  that  you  will  want  to  save  those  facilities  against  an  emergency.  I 
question  whether  there  is  any  point  in  saving  plane  factories  against 
the  day  you  may  need  them  again. 


8578     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Senator  Ball.  Has  any  study  been  made,  or  is  it  being  made,  of  the 
possible  amount  of  warehouse  space  that  will  be  required  for  storing 
these  finished,  semifinished,  and  raw  materials  owned  by  the  Govern- 
ment at  the  end  of  the  war  ? 

Mr.  Wilson.  I  have  heard  just  recently  that  it  has  been  suggested 
that  Mr.  Baruch's  committee,  wjiich  is  studying  this  termination 
clause  and  so  on,  give  consideration  to  the  necessity  of  having  a  plan 
for  that,  and  I  presume  they  will.  I  know  they  are  interested  in  it 
now. 

Mr.  Fulton.  Wouldn't  the  Army,  itself,  or  the  Navy  have  to  deter- 
mine the  need  that  they  themselves  think  they  have  for  each  facility 
before  you  could  start  on  that  kind  of  program  ? 

Mr.  Wilson.  Yes;  I  believe  they  will.  I  believe  they  will  have  to 
select  those  plants  that  they  know  that'  they  think  they  will  need,  and 
then  the  balance,  I  surmise,  will  have  to  be  a  cooperative  consideration 
as  to  what  can  best  be  done  with  them  in  the  other  agencies. 

Mr.  Fulton.  Do  you  think  the  companies  themselves  ought  to  con- 
sider whether  they  want  to  use  any  plant  that  is  presently  being  man- 
aged and  operated  by  them  and  notify  the  appropriate  governmental 
agency  that  they  would  like  to  have  a  plant  of  theirs  considered  ? 

Mr.  Wilson.  Yes.  I  believe  that  some  corporations  have  already 
done  that  and  undoubtedly  are  planning  that  this  or  that  plant 
can  be  used  by  them  in  their  peacetime  operations,  and  they  would 
like  to  take  it  over. 

Mr.  Fulton.  Shouldn't  they  all  be  working  on  that  kind  of  thing; 
now? 

Mr.  Wilson.  Yes;  I  believe  that  the  time  will  come  for  it.  It  is 
just  a  question  in  my  mind  as  to  the  when  of  it.  I  think  there  is 
no  question  that  it  ought  to  be  done,  but  the  timing  of  it  is  important. 
Certainly  we  don't  want  to  get  enough  attention  on  this  subject  or, 
indeed,  in  my  judgment,  on  post-war  planning  to  the  point  where 
some  of  the  corporations  engaged  on  what  is  still  important  war 
production  are  devoting  too  much  of  their  time  and  attention  to 
it.  While  those  of  us  in  W.  P.  B.  who  have  this  problem  put  up  to 
us  many  times  are  very,  very  sympathetic  to  the  idea  of  our  larger 
and  more  important  industries  to  post-war  operation  giving  the  at- 
tention to  it  that  it  needs,  we  certainly  don't  go  as  far  as  to  want 
to  see  important  technical  labor  devoted  to  studies  or,  indeed,  to  the 
manufacure  of  tools,  and  so  on,  for  it  at  this  time,  because  it  happens 
that  the  industries  that  would  be  most  likely  to  do  that  are  the  ones 
that  we  think  are  still  engaged  on  war  production  that  is  still  very, 
very  important. 

Mr.  Fulton.  Of  course,  you  do  have  the  factor,  do  you  not,  Mr. 
Wilson,  if  you  assume  that  the  Army  has  determined  its  maximum 
size;  that  on  many  items  and  gradually  an  increasing  number  of 
items  you  are  at  least  approaching  the  time  when  you  will  have 
enough.  They  have  already  cut  back  by  something  like  $6,000,000,- 
000  in  the  War  Department  and  $2,000,000,000  in  the  Navy.  Taking 
an  item  like  small  arms  and  machine  guns,  even  if  you  haven't  won 
the  war,  you  will  have  as  many  of  those  as  could  be  used  by  the 
Army  we  contemplate  having.  If  you  get  more  and  more  of  these 
items,  you  are  really  approaching  the  stage  where  it  is  desirable  that 
you  do  give  at  least  some  thought  to  the  rest  of  it. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8579 

Mr.  Wilson.  That  is  right. 

Mr.  Fulton.  In  many  industries  there  will  be  a  time  lag  that  could 
be  a  very  seriously  hampering  thing  unless  some  thought  is  given 
to  it  before  the  day  when  they  are  told  we  haven't  any  further  use 
for  them  for  war  purposes. 

Mr.  Wilson.  I  am  all  for  the  thought,  Mr.  Fulton,  and  I  believe  in 
the  planning.  I  believe  that  the  time  has  come  for  all  the  agencies 
involved — including  in  that,  of  course,  the  corporations  of  the  coun- 
try who  have  done  a  great  war  job — to  plan,  and  the  whole  thing 
ought  to  be  planned  cooperatively.  The  point  I  tried  to  make  is 
that  I  don't  want  to  see  the  actual  making  of  tools  and  all  interfere 
with  war  production  at  this  point,  and  it  could  easily  do  it.  If  it  is 
planned  carefully  and  the  timing  of  the  various  steps  is  done  co- 
operatively, as  it  can  be  done,  then  I  don't  think  there  is  any  danger. 
Indeed,  I  think  we  must  go  ahead  with  the  post-war  plans  to  that 
extent. 

Senator  Ferguson.  Do  you  find  any  evidence  that  industry  does 
think  that  the  war  is  over  ? 

Mr.  Wilson.  Oh,  yes;  some  evidence  of  it,  and  we  have  from  time 
to  time  what  amount  to  demands  from  certain  industries  that  they 
be  permitted  to  go  ahead  with — at  least,  to  give  consideration  to 
necessary  tooling  jobs  for  after- war  requirements.  I  will  say  that 
I  believe  they  have  in  mind  possibly  only  intermediate  steps.  I 
think  that  is  fine  if  it  is  only  at  the  planning  stage  yet,  but  I  think 
it  would  be  entirely  wrong  if  we  contemplated  giving  either  an  in- 
dustry or  even  just  a  segment  of  industry  the  right  to  go  ahead 
and  use  any  large  amount  of  technical  help  to  do  that  job  today, 
because  I  don't  think  we  have  reached  the  point  where  we  can  see 
manpower  utilized  for  that  purpose  yet. 

The  day  is  going  to  come  when  we  reach  the  point  that  you  just 
mentioned,  Mr.  Fulton,  when  the  capital  goods  requirements  of  the 
Army  and  the  Navy  are  fairly  well  caught  up  with,  regardless  of  the 
state  of  the  war  in  Germany  or  in  the  Pacific,  when  there  may  be  op- 
portunity for  that.     My  point  is  that  it  is  just  a  question  of  timing. 

Mr.  Fulton.  We  have  reached  that  point  in  some  items,  but  be- 
cause of  the  general  manpower  shortage  you  feel  it  hasn't  }^et  got 
to  the  stage  where  much  can  be  done  in  the  line  of  actual  manufactur- 
ing of  tools. 

Mr.  Wilson.  We  can't  do  it  generally.  It  is  spotty  today.  So 
far,  in  most  of  the  cases  where  the  cut-backs  of  certain  of  the  capital 
goods  for  the  Army  and  the  Navy  have  been  made,  we  have  been 
able,  and  in  fact  just  waiting  for  the  opportunity,  to  utilize  that 
labor  to  make  up  certain  shortages.  I  think  of  one  just  within  the 
last  48  hours,  a  considerable  cut-back  of  certain  capital  goods  that 
released  over  5,000  workers  in  a  district  where  we  very  badly  need 
them  for  a  new  capital  goods  demand  of  the  Army.  It  simply 
means  a  shifting  of  labor. 

The  point  I  am  trying  to  make  is  that  it  is  something  that  we  have 
to  guard  against,  if  that  labor  should  have  gone  into  some  peacetime 
operation,  desirable  as  that  might  normally  be.  If  we  still  need 
those  5,000  people  for  a  new  capital  goods  demand  of  the  Army,  it  is 
a  necessity,  and  obviously  we  ought  to  turn  them  into  that  field. 

Senator  Ball.  Mr.  Wilson,  it  struck  me,  in  trying  to  think  through 
this  conversion  problem,  that,  approaching  it  from  the  standpoint 


8580     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

of  employment,  two  of  your  toughest  industries  will  be  aircraft  and 
shipbuilding,  which  have  been  expanded  so  tremendously. 

Mr.  Wilson.  Eight. 

Senator  Ball.  Also,  it  has  been  this  committee's  observation  of  the 
aircraft  industry  that  it  takes  a  long  time  for  them  to  get  into  pro- 
duction and  full  employment  on  a  new  type  of  plane. 

Mr.  Wilson.  A  long  time. 

Senator  Ball.  So  I  think  there  has  to  be  planning  pretty  well 
in  advance  if  you  are  going  to  employ  even  the  fraction  we  have 
talked  about  of  the  people  now  employed  in  the  aircraft  industry 
after  the  war. 

Do  you  know  whether  there  will  be  any  large  proportion  of  the 
present  planes  being  made  that  can  be  converted  to  peacetime  use  ? 

Mr.  Wilson.  I  shouldn't  think  there  would  be  a  large  proportion, 
when  you  consider  the  total  number  of  designs  that  we  are  utilizing 
today.  There  would  be  a  proportion  of  them,  of  course,  that  are  con- 
vertible to  transport,  both  passenger  and  cargo,  and  I  surmise  that 
would  be  the  natural  initial  change-over  point.  You  would  use  what 
3^ou  had. 

Presumably,  all  the  manufacturers  will  want  to  go  ahead  with  new 
models,  because  I  think  they  all  have  ideas  of  improved  transport 
planes  for  future  use,  and  I  am  not  at  all  certain  that  the  time  won't 
come — maybe  it  will  come  in  1944 — with  production  reaching  the 
heights  that  it  is  in  that  industry,  that,  by  arrangement  with  the  pro- 
curement agencies,  their  engineering  forces  can  be  diverted,  that  we 
could  permit  diversion  of  them  to  peacetime  designs.  I  believe  that 
time  will  come.  I  don't  think  it  is  here  yet  in  most  of  the  places,  but  I 
believe  there  will  be  a  time,  maybe  in  '44,  when  the  procurement  agencies 
can  say,  "You  may  divert." 

Senator  Ball.  What  kind  of  financial  position  are  these  airplane 
companies  going  to  be  in  to  make  that  conversion  ?  Assume  that  there 
is  going  to  be  a  tremendous  demand  for  transport  planes  after  the 
war,  and  I  think  there  will  be,  as  well  as  for  smaller  type  taxi  planes 
and  private  planes.  I  have  talked  to  some  of  these  aircraft  manu- 
facturers who  have  virtually  no  post-war  reserves  in  proportion  to 
their  present  pay  rolls  set  up.  Do  you  think  they  are  going  to  be  in 
financial  shape  to  make  that  conversion,  or  are  they  going  to  need 
financial  help  from  the  Government,  or  will  they  be  able  to  get  it  from 
banks  ?  We  know  that  a  lot  of  them  have  expanded  20  or  30  times  on 
a  very  small  capital  base,  and  the  Government  has  taken  most  of  what 
they  are  making  through  taxes  and  renegotiation. 

What  is  that  picture  ? 

Mr.  Wilson.  My  guess  would  be,  first,  that  I  think  you  have  to  con- 
template that  the  whole  structure  of  the  industry  is  bound  to  be  con- 
siderably reduced  in  size.  I  don't  see  how  it  could  be  otherwise.  I 
don't  think  any  of  us  can  contemplate  an  airplane  business  for  peace- 
time of  anythink  like  10,000  planes  a  month,  and  that  is,  of  course,  what 
they  are  set  up  to  do — plus.  As  a  matter  of  fact,  if  there  were  the  need, 
they  could  produce  more.  That  is  the  structure.  I  think  that  is  bound 
to  be  reduced. 

I  don't  like  to  pass  my  judgment  of  their  financial  ability  or  their 
ability  to  get  the  financial  assistance  they  need.  If  there  is  a  proper 
termination  of  their  contracts  and  it  is  reasonably  satisfactory  to  them, 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM     8581 

I  should  think  they  would  be  in  position  to  finance  their  contracted 
business  of  the  future.  But  that  is  only  a  curbstone  opinion.  I  clon't 
profess  to  know  anything  about  the  financial  structure  of  them  for 
post-war  operation,  Senator. 

The  Chairman.  Senator  Kilgore,  did  you  have  a  question  ? 

Senator  Kilgore.  Yes;  I  have  a  question  or  two  to  ask  along  the 
line  you  were  asking  about. 

We  have  a  tremendous  oversupply  of  facilities  now,  not  for  our 
present  needs,  but  if  we  would  convert  to  the  type  of  planes  we  would 
need  in  the  post-war  period,  it  would  probably  double  or  treble  in 
facilities  what  we  now  need ;  isn't  that  right  % 

Mr.  Wilson.  That  is  right. 

Senator  Kilgore.  However,  we  say  we  can't  use  these  planes.  As 
a  matter  of  fact,  we  will  be  able  to  use  all  the  engines  and  instruments 
and  radios  and  things  of  that  kind  in  the  post-war  plane  that  we  are 
now  producing,  and  the  main  thing  is  that  we  will  have  a  different 
design  of  fuselage  and  wings ;  isn't  that  right  ? 

Mr.  Wilson.  That  is  right. 

Senator  Kilgore.  With  our  present  facilities,  if  we  should  go  into 
the  type  of  plane  we  will  build  post-war,  we  could  probably  build 
15,000  or  20,000  a  month  under  the  present  methods  in  the  small  planes, 
cheap  planes,  and  things  of  that  kind. 

Mr.  Wilson.  That  is  right. 

Senator  Kilgore.  So  we  are  going  to  have  a  big  cut-back  in  facilities 
there. 

Mr.  Wilson.  I  don't  think  there  is  any  question  about  it,  Senator, 

Senator  Kilgore.  It  is  a  question  of  the  companies  that  are  now 
building  rather  reorganizing  their  ideas  on  the  future.  Isn't  that  one 
of  their  questions  ? 

Mr.  Wilson.  That  is  right. 

cost-plus-fixed-fee  contracts 

The  Chairman.  Mr.  Wilson,  I  submitted  some  questions  to  you  on 
various  subjects,  including  the  ones  we  have  been  discussing.  I  should 
appreciate  it  very  highly  if  you  would  take  those  through  in  the  order 
in  which  they  come,  those  which  you  care  about  answering.  You 
agreed  to  submit  a  brief  on  those  which  you  don't  feel  like  answering 
at  this  time.  If  you  will  just  follow  that  through,  we  will  probably 
get  a  more  orderly  record  on  this  thing  in  which  we  are  interested. 
Then  we  will  have  any  questions  that  we  want  to  ask  after  you  get 
through. 

Mr.  Wilson.  The  first  question  you  asked,  sir,  is  about  Dallas. 

The  second  one  is  about  the  cost-plus-fixed- fee  contracts.  You  in- 
quired whether  lump  sum  contracts  increase  or  lower  the  rate  of 
production,  and  would  lump  sum  contracts  alleviate  the  manpower 
shortage. 

I  surmise  that  fixed-price  contracts  are  unquestionably  the  most 
desirable  kind  and  that  in  the  face  of  the  fact  that  it  is  true  that  we 
have  a  very  large  number  of  cost-plus-fixed-fee  contracts  to  deal  with 
in  the  air  frame  industry  particularly.  I  think  it  would  be  highly 
desirable  if  they  could  all  be  fixed-price  contracts.  I  don't  think  they 
can  be.  I  certainly  don't  believe  they  could  possibly  have  been  under 
the  conditions  that  prevailed,  until  very  recently.     There  was  no  basic 


8582     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

data  on  which  to  base  fixed  prices  until  very  recently.  Concerns  that 
built  a  few  hundred  planes  a  year  were  given  contracts  to  build 
thousands  of  planes.  The  designs  of  those  planes  were  not  frozen 
when  they  set  up  plants  to  do  it.  I  don't  think  that  it  was  humanly 
possible  to  have  gotten  up  fixed  prices  that  would  stand,  that  would 
have  been  fair  to  the  contractor  and  the  taxpayer. 

Some  manufacturers  have  elected,  as  time  went  on  and  they  had  cost 
data,  to  request  fixed  price.  In  other  words,  the  manufacturers  them- 
selves were  perfectly  willing  to  take  fixed  price  when  there  was  basic 
data  available  to  make  that  feasible. 

Senator  Ferguson.  Mr.  Wilson,  where  they  did  that,  did  you  find 
any. difference  in  the  requirements  of  manpower? 

Mr.  Wilson.  Yes.  In  one  case  there  was  a  very  smoothly  working 
operation  where  there  was  a  fixed-price  contract  involved,  as  com- 
pared with  another  operation  adjacent  to  it  where  there  was  a  cost- 
plus-fixed-fee.  But  I  don't  believe  that  I  would  place  too  much 
weight  on  that,  because  in  the  case  of  the  fixed-price  contract  the  manu- 
facturer had  been  making  that  particular  kind  of  plane  for  3  years; 
he  knew  how  to  make  it,  and  he  had  organized  well.  In  the  case  of 
the  manufacturer  who  was  on  a  cost-plus-fixed-fee  basis,  there  ad- 
mittedly was  some  confusion  and  nonutilization  of  labor;  it  was  a  new 
job  to  them,  and  he  hadn't  worked  out  efficient  methods,  naturally. 
When  that  job  is  3  years  old,  he  will  probably  be  doing  just  as  well 
with  it  as  he  is  with  the  fixed-price  job.  That  particular  manufac- 
turer wants  to  get  over  to  a  fixed-price  basis  on  this  new  job  just  as 
quickly  as  he  can,  but  he  hasn't  the  basic  data  to  do  it  today. 

Senator  Ball.  Mr.  Wilson,  as  long  as  the  Government  has  the  au- 
thority, and  uses  it,  to  renegotiate  a  contract  after  it  is  finished  on  the 
basis  of  cost  plus  a  percentge  of  cost,  which  is  the  way  they  are  doing 
it,  have  you  any  such  thing  as  a  fixed-price  contract? 

Mr,  Wilson.  No ;  you  really  haven't,  of  course,  because  it  is  a  fixed- 
price  subject  to  taking  all  the 

Senator  Ball  (interposing).  We  are  talking  on  the  assumption  that 
if  you  give  a  man  a  fixed  price,  then  you  are  giving  him  an  incentive 
to  reduce  his  cost.  Then  the  ^Renegotiation  Board  comes  along  and, 
if  he  reduces  his  cost,  they  cut  his  profits  down  so  that  he  is  still  mak- 
ing cost-plus-a-fixed  fee,  only  his  costs  were  lower,  so  his  fixed  fee  is 
less. 

Mr.  Wilson.  That  is  true. 

Senator  Wallgren.  Mr.  Wilson,  in  the  matter  of  manufacture  of 
planes,  there  is  a  constant  change  in  design? 

Mr.  Wilson.  That  is  right. 

Senator  Wallgren.  Regardless  of  whether  or  not  the  plane  is  prov- 
ing itself  on  the  fighting  front  ? 

Mr.  Wilson.  That  is  right. 

Senator  Wallgren.  The  P-38  today — I  think  we  have  about  the 
ninth  model  of  that  in  operation  ? 

Mr.  Wilson.  That  is  right. 

Senator  Wallgren.  How  could  we  work  out  a  fixed  price  there? 

Mr.  Wilson.  Well,  of  course,  it  isn't  easy,  nor  is  it  impossible.  I 
think  that  is  a  pretty  good  illustration,  that  the  Lightning,  from  a  year 
ago,  from  the  design  of,  say,  a  year  ago,  admittedly  there  would  be  a 
very  considerable  change  in  the  price,  assuming  that  had  been  on  a 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8583 

fixed-price  basis.  I  wouldn't  say  that  the  changes  that  were  made, 
however,  could  not  have  been  evaluated  upward  and  downward  and  a 
fixed  price  arrived  at. 

Senator  Wallgren.  For  instance,  recently  you  have  stepped  up  the 
power  on  the  P-38. 

Mr.  Wilson.  That  is  right. 

Senator  Wallgren.  To  such  a  point  that  you  have  had  to  make  a 
complete  change  in  the  way  the  supercharger  was  installed. 

Mr.  Wilson.  That  is  right. 

Senator  Wallgren.  That  incurred  considerable  expense  to  the  fac- 
tories trying  to  do  that  ? 

Mr.  Wilson.  Oh,  yes.  You  would  have  to  evaluate  it  and  change  the 
price.  There  is  no  question  about  that.  It  would  have  made  a  differ- 
ence of  thousands  of  dollars  per  plane,  but  you  do  that  in  ordinary  busi- 
ness many,  many  times.  It  is  harder  to  do  it  under  these  conditions — 
certainly  harder  to  do  it  in  a  new  industry  like  this,  which  is  just  learn- 
ing its  mass  production  lessons  and  so  on,  and  where  it  hasn't  the  basic 
cost  data  of  years'  standing  to  guide  it  and  aid  it.  It  is  hard,  but 
not  impossible. 

Senator  Kilgore.  In  other  words,  Mr.  Wilson,  airplane  construction 
has  changed  from  what  you  might  call  a  custom-made  job  to  assembly- 
line  methods,  and  the  question  is,  Has  it  been  educated  sufficiently  on 
the  new  methods  so  that  it  can  properly  evaluate  them 

Mr.  Wilson.  How  could  it,  Senator,  in  a  few  years  ?  I  don't  think 
it  could  possibly  be. 

Senator  Wallgren.  When  it  comes  to  a  question  of  modification  of 
these  planes,  too,  of  course,  I  suppose  the  Government  figures  the  con- 
tract price  on  that  plane  at  the  time  it  leaves  the  factory,  and  the  Army 
does  the  modification,  is  that  right  ? 

Mr.  Wilson.  That  is  right. 

Senator  Wallgren.  The  Army  sustains  all  that  cost  of  modifica- 
tion? 

Mr.  Wilson.  That  is  right.  They  either  do  it  themselves — they 
either  modify  it  themselves  or  they  have  the  manufacturer  operate  a 
modification  center  and  make  the  new  changes  that  they  regard  as 
desirable. 

Senator  Ferguson.  Mr.  Wilson,  have  the  Army  contracting  officers 
and  also  the  Navy's  really  been  looking  into  it  to  see  when  they  go 
from  a  cost  plus  to  a  fixed  fee  ?    Has  that  been  properly  taken  care  of  ? 

Mr.  Wilson.  I  know  that 

Senator  Kilgore  (interposing).  Wait  a  minute.  Pardon  me,  Sen- 
ator. Let's  get  that  straightened  out.  Instead  of  fixed  fee,  let's 
call  that  unit  price,  because  as  Senator  Ball  has  said,  it  isn't  a  fixed 
fee,  and  it  isn't  fixed  price ;  it  is  a  unit  price. 

Senator  Ferguson.  Well,  you  understand  the  different  contracts. 

Mr.  Wilson.  Yes ;  I  know  that  they  have  had — I  am  thinking  of  the 
Air  Corps,  particularly.  They  have*  given  consideration  to  a  number 
of  suggested  changes  along  that  line,  Senator.  I  think  they  have  been 
estopped  in  a  number  of  cases  by  the  difficulties  of  the  changes  con- 
templated. About  each  time  that  it  looked  as  if  some  manufacturers 
had  reached  a  point  where  you  might  go  to  a  fixed  price  basis,  then 
along  came  a  flood  of  changes  dictated  by  the  demands  from  the  various 
theaters  of  war  for  the  changes,  and  so  they  have  gone  along  with  the 


8584     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

present  method.  There  is  no  question.  The  impetus  has  been  to  get 
the  planes  at  any  price. 

Senator  Ball.  Assuming  that  if  you  can  get  a  contractor  on  a  fixed- 
price  basis,  that  you  then  give  him  a  real  incentive  to  utilize  manpower 
and  materials  more  efficiently  and  thereby  reduce  his  costs,  and  also 
relieve  the  manpower  shortage,  doesn't  it  seem  to  you  that  that  could 
be  really  effective  only  if,  when  the  procurement  agency  decides  they 
have  enough  cost  data?  to  negotiate  a  fixed-price  contract,  they  then 
specifically,  in  the  contract,  provide  that  it  is  not  subject  to  renego- 
tiation, so  the  contractor  knows  where  he  is  at  ?  And  isn't  it  still  on  a 
cost-plus  or  a  percentage-of -cost  basis  ? 

Mr.  Wilson.  That  would  be  the  ideal  arrangement. 

Senator  Ball.  Isn't  that  the  only  way  that  you  actually  give  them 
an  incentive  to  cut  costs  ? 

Mr.  Wilson.  That  would  provide  the  maximum  incentive,  there  is 
no  question  of  that. 

Senator  Ball.  Aren't  there  actually  thousands  of  items  they  are  pro- 
curing on  which  they  do  have  enough  data  to  do  that  today  ? 

Mr.  Wilson.  I  judge  there  are.  There  probably  would  still  be  the* 
question  of  whether  they  believe  the  manufacturer  knows  what  the 
reaching  of  anything  approaching  maximum  efficiency  is  going  to  do 
to  his  cost,  and  what  the  profit  is  going  to  be,  accordingly.  Therefore,, 
I  surmise  that  that  is  the  thing  that  makes  them  hesitant  about  taking- 
out  the  renegotiation  clause. 

Senator  Ball.  Oh,  sure.  Now  and  then  they  are  going  to  negotiate- 
a  fixed  price  that  will  give — and  some  guy  will  go  out  and  do  an  out- 
standing job  and  make  a  big  profit,  and  the  contracting  officer  who 
made  the  contract  probably  says  it  is  a  black  mark  on  his  record,  but 
we  are  trying  to  look  at  the  over-all  picture. 

Every  industry  is  yelling  about  a  manpower  shortage,  and  it  strikes 
me  that  if  you  could  really  get  more  fixed-price  contracts  that  were* 
really  fixed  price,  that  would  stand,  that  wouldn't  be  renegotiated,  it 
would  be  the  healthiest  thing  we  could  have  really  to  relieve  that  man- 
power shortage. 

Mr.  Wilson.  The  more  of  it  you  can  have  the  better,  the  more  in- 
centive there  would  be. 

Senator  Ball.  Of  course,  it  might  now  and  then  mean  that  some- 
body would  make  more  profit  than  they  wanted  them  to  make,  but 
that  is  one  of  the  risks  of  the  business.  Also,  here,  now  and  thenr 
there  would  be  a  contractor  who  went  broke. 

Mr.  Wilson.  Eight. 

The  Chairman.  What  is  the  next  question,  Mr.  Wilson  ? 

INCENTIVE  WAGE  PLAN  FOR  WAR  PRODUCTION 

Mr.  Wilson.  Are  wage-incentive  plans  feasible  for  war  production  ? 
If  so,  what  steps  have  been  taken  to  install  such  plans  ? 

I  think,  there,  that  they  are  feasible ;  they  are  being  widely  used.  Of 
course,  they  have  always  been  widely  used.  I  think  there  has  been  an 
increased  use  of  them  in  the  last  6  months,  if  you  please.  I  know  of 
between  three  and  four  hundred  companies  that  have  installed  varying: 
kinds  of  production-incentive  plans  in  that  period,  and  they  appear  to 
be  bringing  about  satisfactory  results.  Varying  increases  in  produc- 
tion, from  10  to  30  percent,  are  not  unusual  as  a  result  of  these  incentive' 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8585 

plans,  and  there  is  more  interest  today  on  the  part  of  some  of  the  manu- 
facturers who  didn't  think  they  were  feasible  for  their  particular  in- 
dustries  than  we  have  had  previously.  And  it  may  be  that  from  this 
point  forth,  we  shall  be  able  to  get  even  the  air  frame  industry — which 
has  not  been  particularly  interested  in  it — get  them  to  use  incentive 
systems. 

Two  of  the  companies  have  already ;  one  has  a  plan  in  use ;  another 
one  has  applied  to  the  War  Labor  Board  for  permission  to  use  it,  and 
there  is  interest  on  the  part  of  a  couple  more. 

Senator  Wallgren.  Mr.  Wilson,  what  do  you  think  about  the  plan 
that  has  been  offered  by  one  plane  plant  for  this  incentive  wage  to  be 
paid  after  the  war?  The  trouble  up  to  now  has  been  that  when  a 
man  found  that  he  had  accumulated  an  additional  little  fund,  he 
would  lay  off  and  go  on  a  vacation  or  a  trip  or  something  of  that 
sort.  This  idea,  to  let  his  incentive  wage  pile  up,  that  is,  the  increase, 
and  pay  it  to  him  after  the  emergency  ? 

Mr.  Wilson.  From  a  social  standpoint,  it  is  obviously  pretty  good. 
From  a  practical  standpoint,  unless  it  was  widely  used  and  widely  ac- 
cepted both  by  labor  and  by  industry,  I  don't  think  it  will  be  very 
good  in  the  case  that  you  are  speaking  of,  because  the  manufacturer 
who  made  it  on  that  basis,  obviously,  would  be  at  a  serious  handicap 
as  compared  with  the  manufacturer  who  paid  the  incentive  wage  every 
month. 

Senator  Wallgren.  I  know,  but  couldn't  you  make  it  general  ? 

Mr.  Wilson.  From  the  social  standpoint,  I  think  it  has  possibili-. 
ties. 

Senator  Wallgren.  We  lay  that  down  as  a  formula  for  the  paying 
of  an  incentive  wage. 

Mr.  Wilson.  It  has  possibilities. 

Senator  Wallgren.  It  could  be  paid  in  bonds  or  something  like 
that, 

Mr.  Wilson.  It  has  been  suggested  that  it  be  paid  in  bonds,  but  no 
matter  how  it  be  paid,  it  has  been  suggested  that  it  be  paid  at  the  end 
of  the  war  period,  tiding  over  some  to  help.  Socially,  I  think  it  has 
possibilities,  but  it  would  have  to  be  pretty  widely  used,  or  else  manu- 
facturers who  tried  to  sell  it  would  have  trouble. 

Senator  Wallgren.  You  have  taken  a  look  at  Douglas's  plan  ? 

Mr.  Wilson.  I  have ;  yes,  I  have. 

Senator  Wallgren.  What  do  you  think  of  that? 

Mr.  Wilson.  That  is  the  one  I  was  thinking  of,  and  my  answer 
went  to  that.  If  it  was  widely  accepted  by  labor  and  industry,  it 
would  be  good.  He  couldn't  compete  with  that  plan.  That  is,  he 
couldn't  take  that  plan  and  compete  with  the  manufacturer  who  was 
paying  every  month.     Of  that  I  am  quite  sure. 

Senator  Kilgore.  But  it  would  create  a  saving  to  be  used  in  the  post- 
war period  when  there  may  be  a  falling  off  of  work  in  that  particular 
industry. 

Mr.  Wilson.  Oh,  yes ;  that  is  right. 

Senator  Ball.  Oh,  yes;  that  is  right.  Have  you  any  knowledge, 
Mr.  Wilson,  of  how  widely  incentive  wages  for  increased  production 
per  man  are  used  in  Canada,  Britain,  and  Russia  ? 

Mr.  Wilson.  No ;  I  haven't.    I  haven't. 

Senator  Ball.  I  have  seen  some  reports  that  Russia  uses  it  almost 
throughout  industry. 

311932 — 14— pt.  21 6 


8586     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Mr.  Wilson.  Yes ;  but  I  don't  think  they  are  quite  the  same  as  our 
incentive  plans.  They  provide  a  little  more  money  and  a  little  more 
food  and  things  of  that  kind.  Those  are  the  incentives.  I  don't 
know  enough  about  them. 

Senator  Wallgren.  Do  you  know  whether  anybody  has  made  any 
effort  at  all  to  have  labor  accept  that  plan  ? 

Mr.  Wilson.  This  Douglas  plan,  for  example? 

Senator  Wallgren.  Yes.  So  that  we  could  have  it  as  a  general 
plan,  a  formula  of  paying  incentive  wages. 

Mr.  Wilson.  There  is  no  effort  that  has  been  made  except  to  a  local 
group  out  there.  That  plan  is  going  to  be  submitted  at  the  first 
meeting  of  a  group  that  has  been  proposed  that  we  set  up  here  in 
Washington,  or  that  the  War  Production  Board  sponsor  a  group  of 
the  top  labor  people  in  the  aircraft  industry,  both  A.  F.  of  L.  and 
C.  I.  O.,  with  a  group  of  manufacturers  to  sit  down  and  consider 
together  such  schemes  as  that,  general  labor  conditions  in  that  in- 
dustry, general  production  conditions  in  the  industry.  That  is  being 
submitted,  that  idea  is  being  submitted,  to  the  manufacturers,  labor 
has  already  met  on  it,  and  if  that  kind  of  group  comes  together — as 
I  rather  believe  they  may — then  that  Douglas  scheme  you  speak  of  is 
to  be  submitted  to  them  for  their  consideration.  It  is  thought  that 
will  be  a  good  springboard  for  it. 

The  Chairman.  What  is  the  next? 

QUESTION  OF  ADVANCE  NOTICE  OF  CONTRACT  TERMINATION 

Mr.  Wilson.  On  the  contract  termination,  Mr.  Chairman,  that  is 
an  item  on  which  I  would  like  to  submit  a  brief,  if  it  meets  with  your 
approval.  I  find  that  a  very  profound  subject,  and  I  don't  feel 
capable  of  outlining  my  views  on  that  without  more  time  for  study, 
and  I  have  prepared  a  brief  on  it.  I  am  not  at  all  satisfied  with  it. 
I  would  like  to  prepare  a  brief  and  give  you  an  answer  to  it. 

The  Chairman.  That  will  be  perfectly  all  right. 

Mr.  Wilson.  The  next  one  is,  is  it  possible  to  plan  war  production 
so  as  to  give  advance  notice  of  termination  ?  And  how  important  is 
such  notice  to  industry? 

I  believe  that  we  are  approaching  the  time  when  we  can  give  ad- 
vance notice  to  industry  and  to  segments  of  industry,  and  I  believe 
that  that  notice  is  very  important.  What  they  can  do  with  such 
notice,  of  course,  will  depend,  as  I  see  it,  largely  on  the  conditions 
that  prevail  at  the  time  that  such  notice  can  be  given.  I  mean  the 
conditions  of  the  war  effort  and  how  things  are  going  and  so  on. 

Are  the  estimates  of  requirements  by  the  services  made  realistically 
in  such  a  manner  as  to  enable  the  War  Production  Board  and  industry 
to  make  practical,  long-range  plans  for  termination  and  reconversion  ? 

Well,  of  course,  there  is  obviously  a  considerable  amount  of  realism 
coming  into  the  picture  today  with  the  very  substantial  cut-backs 
which  will,  as  they  change  their  plans,  enable  the  War  Production 
Board,  possibly,  to  speed  up  the  time  that  it  can  give  notice  of  the 
reconversion  possibilities. 

Are  inventories  of  basic  materials  increasing?  And  if  so,  what 
steps  can  be  taken  to  prevent  war  industries  from  building  up  exces- 
sive inventories? 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8587 

Inventories  of  basic  materials  within  industries  are  not  increasing 
very  substantially.  The  industries,  the  contractors  themselves,  are 
watching  these  inventories  of  raw  materials  very  carefully,  very 
properly  so,  in  my  judgment.  They  obviously  don't  want  to  be  caught 
with  inventories  beyond  their  contract  requirements,  so  that  I  don't 
believe  the  basic  materials  inventories  are  increasing  unduly. 
The  Chairman.  The  total  over-all  figure  on  them,  though? 
Mr.  Wilson.  Is  up.  . 

The  Chairman.  As  we  have  been  able  to  find  it,  is  considerably  up 
from  what  it  was  in  the  ordinary  peace,   . 

Mr.  Wilson.  Up  by  probably  around  $5,000,000,000,  approximately. 
But  of  course  our  production  is  up  many  hundred  percent,  so,  there- 
fore, it  is  obvious  that  this  figure  would  be  up.  But  I  don't  think  it 
is  unduly  high  in  consideration  of  the  volume  of  business  that  they 
are  currently  handling  and  turning  out. 

Senator  Ferguson.  Mr.  Wilson,  can't  you  control  it  by  your 

Mr.  Wilson  (interposing).  Controlled  Materials  Plan,  C.  M.  P.? 
Yes,  sir.  We  are  watching  it,  and  with  the  operation  of  the  60-day 
clause,  or  in  the  cases  where  that  has  been  modified  for  practical 
reasons,  even  to  the  120-day  clause  in  the  C.  M.  P.,  I  think  it  is  having 
the  effect  of  maintaining  those  inventories  on  a  reasonable  basis,  con- 
sidering present  volume. 

Senator  Ferguson.  You  believe  that  plan  is  such  that  you  can  con- 
trol it  if  you  desire  to  control  it  at  a  particular  point  ? 

Mr.  Wilson.  Yes;  I  do.  Generally  speaking,  I  believe  the  plan 
controls  it. 

Mr.  Fulton.  Generally  speaking,  some  of  your  mos£  basic  and 
important  commodities  are  getting  relatively  free  at  the  present  time  ? 
Mr.  Wilson.  That  is  right. 

Mr.  Fulton.  Copper,  I  noticed,  you  are  adding  to  your  inventories. 
Mr.  Wilson.  That  is  right. 
Mr.  Fulton.  At  a  rather  astonishing  rate. 

Mr.  Wilson.  That  is  right,  and  the  same  thing  with  aluminum, 
and  indeed  even  with  steel,  although  I  have  to  be  careful  about  that 
statement  when  I  say  that,  because,  while  basic  steel  is  in  good  supply, 
it  is  true  that  there  are  a  few  categories  of  fabricated  steel  in  which 
we  still  have  shortages;  for  example,  plates.  We  are  catching  up 
with  them,  and  we  have  new  facilities  coming  in  that  will  overcome 
those  shortages,  in  the  next  6  months,  but  generally  speaking,  all  the 
basic  materials  are  now  in  good  supply.  In  other  words,  supply  and 
requirements  are  in  good  balance. 

Mr.  Fulton.  We  have  gone  through  the  thing  of  machine  tools  be- 
ing extremely  critical  and  then  becoming  relatively  free  ? 
Mr.  Wilson.  Eight. 

Mr.  Fulton.  Now  the  materials  are  in  the  same  category,  in  the 
manpower  stage. 

Mr.  Wilson.  That  is  right. 

Mr.  Fulton.  But  if  we  carry  on  real  efficiency,  we  can  get  but  of 
that  manpower  stage  in  not  too  many  months  in  the  future? 
Mr.  Wilson.  Right. 

Mr.  Fulton.  So  that  that  again  emphasizes,  say,  a  manufacturer 
would  be  patriotic  rather  than  unpatriotic,  who  tried  to  make  some 
worth-while  plans,  as  long  as  he  didn't  ruin  some  war  program  ? 


8588     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Mr.  Wilson.  Absolutely. 

Mr.  Fulton.  For  the  future,  because  he  would  thereby  be  reducing 
the  time  lag  necessary  to  get  back  into  business  and  provide  jobs  for 
returning  soldiers  ? 

Mr.  Wilson.  Entirely  right.  My  only  point — I  hope  I  didn't  make 
a  statement  that  led  you  to  believe  that  I  didn't  believe  that  many  of 
the  manufacturers  ought  to  go  ahead  with  that.  All  I  am  hoping  for 
is  the  right  timing  of  this  so  that  we  won't  get  an  industry — because 
I  surmise  in  the  last  analysis  that  much  of  this  will  be  done  at  industry 
levels,  and  I  think  it  should  be,  indeed — that  we  don't  go  off  on  a 
planning  spree  that  will  use  large  amounts  of  technical  labor,  par- 
ticularly before  there  is  assurance  that  that  labor  can  be  spared  from 
essential  war  production.     It  is  just  a  matter  of  timing. 

Mr.  Fulton.  At  the  same  time,  when  we  converted  from  peace  in- 
dustry  to  war  industry,  all  those  companies  had  in  effect  an  unlimited 
customer  who  was  ready  to  pay  whatever  the  cost  might  be. 

Mr.  Wilson.  That  is  right. 

Mr.  Fulton.  And  even  so,  it  was  a  difficult  and  a  time-consuming 
process.  The  reconversion  will  be  much  more  difficult,  much  more 
risky  to  industry,  will  it  not  ? 

Mr.  Wilson.  Certainly  it  will,  because  he  is  now  going  back  and: 
trying  to  pick  up  his  mass  customers. 

The  Chairman.  He  won't  have  one  customer  to  keep  him  going 
while  he  is  doing  that.     That  is  the  thing  that  worries  me. 

Mr.  Fulton.  So  he  needs  as  much  advance  notice  as  he  can  get,  and 
as  much  opportunity  to  do  what  you  might  term  necessary  ground 
work. 

Mr.  Wilson.  That  is  right. 

Mr.  Fulton.  As  president  of  General  Electric,  could  you  tell  us 
whether  that  company  is  working  on  that  kind  of  program  ? 

Mr.  Wilson.  I  haven't  the  slightest  idea.  I  haven't  had  any  contact 
with  the  General  Electric  Co.  in  14  months.  Believe  it  or  not,  I  even 
steered  away  from  General  Electric  people.  I  haven't  seen  them.  I 
don't  know  anything  about  their  plans.  I  hope  one  of  these  days 
shortly  to  go  back  and  get  in  the  plans,  but  I  haven't  yet. 

The  Chairman.  One  of  your  vice  presidents  was  in  to  see  me  yes- 
terday and  said  he  hoped  you  would  hurry  up  and  come  back,  and  I 
said  I  hoped  you  would  not  go  back  until  the  war  is  over.  Rather  a 
difference  of  opinion. 

PROBLEMS  OF  CONVERSION   FROM   WAR   PRODUCTION 

The  Chairman.  What  is  the  next  question,  Mr.  Wilson  ? 

Mr.  Wilson.  After  that  statement  of  yours,  I  am  glad  to  take  the 
next  question  up,  Senator. 

The  Chairman.  What  problems  will  be  involved  in  clearing  the 
factories  for  the  production  of  peacetime  goods,  and  what  progress  has 
been  made  in  evolving  procedures  to  accomplish  this? 

That  was  the  point  I  covered  before,  that  I  thought  we  ought  to. 

Can  any  steps  be  taken  now  to  obtain  orders  or  devise  marketing 
procedures  that  will  assist  in  reconverting  industry? 

I  don't  know  whether  I  would  say  now,  but  I  think  there  will  come 
a  time,  and  I  don't  believe  it  is  very  far  off,  regardless  of  the  state 
of  our  war  with  Germany,  that  industry  should  have  the  opportunity — • 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM     8589 

industry  and  commerce — to  plan  in  their  respective  lines.  I  would 
liope  that  they  would  be  encouraged,  indeed,  to  make  very  definite 
plans  with  respect  to  the  quantities  of  the  major  consumer  goods  prod- 
ucts that  they  are  going  to  make  just  as  soon  as  the  Government  is 
able  to  give  them  the  green  light.  Maybe  it  ought  to  be  done  on  vary- 
ing bases ;  that  is,  when  Germany  is  knocked  out,  we  go  ahead  on  one 
part  of  the  plan,  which  would  be  to  permit  commerce  and  industry 
to  get  together  on  orders  for  large  quantities  of  automobiles  and  all 
the  household  consumer  goods  and  soft  goods,  and  so  on,  on  one  scale ; 
and  then  of  course  a  plan  leading  up  to  when  the  full  green  light  could 
be  given  at  some  later  date  when  Japan  is  knocked  out.  My  point  is 
that  I  believe  that  if  commerce  and  industry  can  be  encouraged  to 
make  up  reasonably  definite  plans — commerce,  call  it  retailers  and 
wholesalers — getting  their  actual  orders  in,  tentative  orders  if  you 
please,  which  in  the  aggregate  would,  I  should  think,  cover  billions  of 
dollars'  worth  of  goods,  so  that  the  manufacturers,  on  getting  the 
green  light,  would  be  in  position  to  proceed  with  post-war  production, 
I  believe  we  would  thus  strengthen  our  post-war  economy  very  much 
quicker  than  i  f  they  have  to  wait  for  some  event  a  year  hence  and  then 
go  through  the  throes  of  finding  out  what  they  are  going  to  make  and 
how  much  they  are  going  to  make. 

I  believe  a  great  deal  of  that  can  be  done  without  any  interference 
with  war  production  at  almost  any  time  from  this  point  forth. 

Then  there  would  come,  assuming  now  that  industry  generally  had 
those  tentative  orders,  presumably  orders  which  became  effective  when 
the  Government  announced  certain  stages  that  we  could  go  ahead, 
industry  could  go  ahead  with,  let  us  say,  50  percent  of  consumer  goods, 
hard  goods,  then  the  orders  became  effective  and  the  manufacturers 
could  proceed.  I  believe  that  would  save  a  great  deal  of  time.  It 
would  give  the  manufacturers  a  line  on  what  they  had  to  look  forward 
to,  and  I  should  think  it  would  be  encouraging  to  the  vast  army  of 
wholesalers  and  retailers  who  haven't,  of  course,  at  the  present  time 
very  much  to  sell  and  who  I  think  would  be  perfectly  willing  to  coop- 
erate in  trying  to  make  up  post-war  orders  which  would  become  effec- 
tive whenever  these  days  were  announced. 

Mr.  Fulton.  That  would  have  the  effect  of  reducing  capital  require- 
ments by  more  or  less  assuring  the  manufacturer  of  a  quick  market 
and  he  wouldn't  have  to  carry  the  goods  longer  than  a  given  specified 
period. 

Mr.  Wilson.  The  manufacturer  would  know  what  he  had  to  look 
forward  to,  and  it  would  have  that  effect  because  it  would  give  him  a 
quick  market  for  his  goods. 

Mr.  Fulton.  But  wouldn't  the  wholesaler  and  retailer  have  to  know 
something  of  the  nature  of  the  products  the  manufacturer  intended 
to  offer,  or  are  you  referring  to  more  or  less  standardized  articles  ? 

Mr.  Wilson.  Well,  it  seems  to  me  that  that  is  where  the  manufac- 
turers and  the  wholesalers  and  the  retailers  get  together.  I  think  the 
time  is  fast  approaching  when  that  getting  together  is  warranted,  and 
determination  made,  as  far  as  it  is  possible  to  do.  It  will  be  a  spotty 
sort  of  thing,  I  admit,  but  they  ought  to  have  some  idea  of  what  they 
are  going  to  get  at  the  interim  stage  and  what  they  will  get  later  on, 
and  I  should  think  the  manufacturers  ought  to  have  some  idea  of 
what  the  retailers  and  wholesalers  are  willing  to  accept  in  the  way  of 


8590     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

interim  models— I  am  thinking,  for  example,  of  the  case  of  household 
appliances,  which  is  a  tremendous  business  in  this  country.  I  believe- 
that  it  would  be  possible  for  them  to  get  together  and  get  a  pretty 
good  line  on  what  would  be  acceptable  to  the  American  people,  and  in 
what  quantities  .they  need  them. 

Mr.  Fulton.  That  would  have  to  be  done  under  the  auspices  of  some 
Federal  organization  or  it  would  probably  run  counter  to  the  antitrust 
law,  would  it  not? 

Mr.  Wilson.  Yes;  that  is  one  of  the  reasons  I  think  it  might  be 
promoted  by  the  industry  branches  of  the  existing  agency,  W.  P.  B. 
They  might  promote  that  sort  of  thing  in  the  interest  of  smoothing 
the  way  for  industry  to  get  going  in  the  post-war  era. 

Mr.  Fulton.  Would  there  be  a  function  for  the  Office  of  Civilian 
Defense  in  that,  or  are  they  doing  anything  along  that  line? 

Mr.  Wilson.  O.  C.  R.,  you  mean,  Civilian  Requirements  ? 
_  Mr.  Fulton.  I  thought  it  was  titled  Office  of  Civilian  Defense,  the 
civilian  agency,  claimant  agency. 

Mr.  Wilson.  Within  W.  P.  B.  ? 

Mr.  Fulton.  Formerly  within  W.  P.  B. 

Mr.  Wilson.  Yes ;  I  would  have  them  spark  plug  the  thing,  as  far 
as  I  am  concerned.    I  believe  they  could  do  it. 

Mr.  Fulton.  Are  you  planning  anything  along  that  line  ? 

Mr.  Wilson.  Yes;  and  operate  through  the  industry  branches. 

The  Chairman.  Proceed,  Mr.  Wilson. 

Mr.  Wilson.  The  only  other  question  you  had  on  here,  Senator,  is 
about  the  working  capital  for  industry  and  the  determination  as  to 
which  plant  facilities  shall  be  sold,  and  the  terms  at  which  they  should 
be  sold. 

The  Chairman.  Which  you  discussed  to  some  extent  awhile  ago? 

Mr.  Wilson.  I  will  be  glad  in  the  memorandum  which  I  would  like 
to  submit  to  you  to  cover  that  further,  if  that  meets  with  your  ap- 
proval. 

The  Chairman.  Thank  you,  Mr.  Wilson.    I  appreciate  that. 

Senator  Ferguson.  There  is  one  question  I  would  like  to  ask.  Mr. 
Wilson,  is  there  anything  being  done  along  the  line  of  inventorying 
the  surpluses  of  machine  tools  and  machines  of  different  kinds,  so  that 
as  we  get  these  surpluses  in  one  industry  other  industries  can  take 
them  over  ? 

Mr.  Wilson.  There  is  a  good  deal  being  done.  Senator.  The  Ma- 
chine Tool  Branch  has  very  good  inventories  of  that,  and  they  are 
making  a  great  many  transfers,  switching  from  one  industry  to  an- 
other. They  have  very  good  records  of  the  inventories  of  tools  that 
are  available  for  transfer.  As  plants  go  down  through  cut-backs  or 
termination  of  contracts  for  any  reason  the  machine  tools  are  inven- 
toried and  an  effort  is  made  to  use  them  in  place,  if  possible,  of  the 
machine  tools  that  were  ordered  new. 

Senator  Ferguson.  Do  you  know  whether  they  have  inventories  of 
surpluses  where  they  are  not  taking  the  industry  out  of  the  particular 
business  where  they  purchased  too  much  because 

Mr.  Wilson  (interposing).  Where  they  bought  too  many  machine 
tools? 

Senator  Ferguson.  Yes ;  do  you  know  whether  they  have  inventories 
today,  whether  or  not  one  department  can  go  and  find  these  surpluses  ? 


INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM     8591 

Mr.  Wilson.  Yes ;  they  have  them  at  the  level  of  the  Machine  Tool 
Branch  of  W.  P.  B.,  and  they  are  able  to  advise  the  various  procure- 
ment agencies,  and  so  on,  of  the  tools  that  are  available.  I  have  no 
idea,  Senator,  that  they  have  a  complete  list  of  the  tools  that  have 
been  ordered  in  good  faith  and  found  to  be  unnecessary.  They  have 
some  idea  of  it,  but  I  have  no  idea  at  all  that  they  have  a  complete 
list.    In  many  plants  they  don't  have  too  many  tools,  undoubtedly. 

Senator  Hatch.  Mr.  Wilson,  I  was  interested  in  what  you  said  about 
converting  to  peacetime  production.  Do  I  understand  you  correctly 
that  your  first  step  is  for  the  manufacturers  now,  for  industry,  to  be 
getting  models  so  the  public  will  know  what  will  be  available  ? 

Mr.  Wilson.  Not  to  agree  as  an  industry,  Senator,  but  I  believe  a 
manufacturer  should  reach  the  stage  where  a  manufacturer,  for  exam- 
ple, would  agree  with  his  wholesalers  and  retailers  on  models,  and  then 
the  manufacturers,  I  believe,  should  get  together  through  the  industry 
branches  to  have  determined  for  them  what  they  can  do,  when  they  can 
proceed  to  make  their  models.  They  are  not  determining  together 
what  industry  they  are  going  to  bring  out,  but  after  they  have  come 
to  an  agreement  with  their  distributors  and  retailers  that  they  need 
X  number  of,  say,  refrigerators,  they  come  together  as  an  industry 
and  put  that  all  together;  that  in  the  first  year  of  manufacture  they 
may  want,  we'll  say,  5,000,000.  There  is  where  the  industry  branch 
operates  to  make  clear  to  them  whether  they  can  have  material  for 
5,000,000,  whether  they  can  have  labor  for  5,000,000.  Those  are  the 
steps  in  it,  as  I  see  them. 

Senator  Hatch.  They  are  all  rather  difficult  steps  to  be  taken,  but 
they  should  be  taken  if  it  can  be  worked  out,  of  course. 

Mr.  Wilson.  I  think  we  are  going  to  have  delays  if  we  don't  take 
them.    They  are  difficult;  yes,  sir. 

Senator  Hatch.  Suppose  you  can  work  out  a  plan  like  that,  what 
effect  will  it  have  on  present  labor  relations  ?  Will  it  give  encourage- 
ment to  labor,  or  would  it  make  them  fear  that  we  are  going  into 
another  depression  and  labor  would  not  have  employment  ? 

Mr.  Wilson.  I  should  think  labor  would  be  encouraged  by  it,  sir, 
because  if  labor  knew  that  industry  and  commerce  were  striving  to- 
gether to  bring  out  workable  plans  that  would  put  labor  back  in_  a 
hurry — and  remember  that  labor  in  this  case  goes  down  to  the  mil- 
lions of  men  who. are  employed  in  these  shops  of  the  retailers  and 
wholesalers — that  surely  would  encourage  them.  I  think  it  would  be 
very  encouraging  to  labor  over-all. 

Senator  Hatch.  Also,  it  would  have  a  good  effect  on  present  labor 
relations,  would  it  not? 

Mr.  Wilson.  It  certainly  couldn't  affect  it  adversely,  sir. 

Sanator  Wallcren.  Mr.  Wilson,  when  this  war  started  we  tried 
to  do  in  a  couple  of  years  what  Germany  had  taken  about  10  years 
to  do,  as  far  as  production  is  concerned.  Is  there  any  evidence  of 
any  possibility  of  tapering  off  in  this  program,  easing  off  in  this 
production  program  ? 

Mr.  Wilson.  You  mean  on  the  part  of 

Senator  Wallgren.  (interposing).  Are  we  still  going  to  have  to 
maintain  this  rapid  rate  we  have  been  maintaining  for  the  past  three 
years.  Once  we  set  a  schedule  of  120,000  planes  a  year,  so  many 
thousands  tanks,  so  many  guns,  cartridges,  so  many  implements  of 


8592     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

warfare,  does  it  appear  to  you  as  if  there  is  any  possibility  of  easing 
off  in  any  of  those  plans  ? 

Mr.  Wilson.  Yes ;  I  think  there  is.  I  think  the  reason  for  the  eas- 
ing off  is  largely  the  filling  up  of  piles  of  capital  goods,  and  in  the 
case  of  planes,  while  we  talked  about  120,000  planes  a  year,  of  course 
we  have  not  attained  that.  We  are  only  runing  at  the  rate  of  about 
105,000.  I  think  the  Army  are  trying  to  determine  whether  they 
want  more  than  that  or  less  than  that. 

Senator  Wallgren.  It  is  my  understanding,  and  the  Committee 
has  been  informed,  that  certain  plants  in  the  country  are  not  working 
at  full  capacity  at  the  present  time;  plants  that  heertofore  have  been 
manufacturing  tanks. 

Mr.  Wilson.  Thanks ;  that  is  right.  That  is  because  of  the  fluidity 
of  war,  again,  and  they  find  they  do  not  need  as  many  tanks  in  these 
operations  as  they  thought. 

Senator  Wallgren.  I  understand  that  obtains,  too,  with  other  im- 
plements of  war. 

Mr.  Wilson.  That  is  right.  I  think  in  a  war  of  this  magnitude  that 
is  certainly  bound  to  occur.  I  do  not  see  how  human  beings,  with  all 
teh  best  skills  you  can  get  together,  could  be  otherwise. 

Mr.  Fulton.  Mr.  Wilson,  do  you  think  it  is  all  fluidity  and  skill, 
or  are  there  errors  in  some  of  the  plants  that  are  operating  at  less 
than  60  percent  of  designed  capacity  ? 

Mr.  Wilson.  There  are  human  beings  in  it,  and  I  surmise  there 
are  errors ;  perhaps  a  lot  of  them. 

The  Chairman.  That  is  all,  Mr.  Wilson. 

TESTIMONY  OF  K.  T.  KELLEE,  PRESIDENT,  CHEYSLEE 
COEPOEATION 

The  Chairman.  Will  you  identify  yourself  for  this  record? 
Mr.  Keller.  I  am  president  of  the  Chrysler  Corporation. 
The  Chairman.  Your  initials  ? 
Mr.  Keller.  K.  T.  , 

PRODUCTION  RECORD  OF  CHRYSLER  CORPORATION 

The  Chairman.  You  heard  the  things  in  which  this  committee 
is  interested,  from  our  questions  and  conversations  with  Mr.  Wilson. 
You  were  one  of  the  biggest -manufacturers  in  the  United  States  in 
peacetime  and  are  doing  one  of  the  big  war  jobs  for  the  country. 
What  can  you  tell  us  along  the  same  lines  Mr.  Wilson  informed  us 
from  a  practical,  on-the-ground  standpoint  ? 

Mr.  Keller.  Senator  Truman,  I  know  most  about  the  Chrysler 
Corporation  and  very  little  about  the  general  situation. 

The  Chairman.  That  is  all  right.  That  is  what  we  want  you  to 
talk  about — the  thing  you  know  about,  practically. 

Mr.  Keller.  Perhaps  as  background  I  had  better  give  you  the 
size  and  scope  of  the  war  effort  of  the  Chrysler  Corporation. 

The  Chairman.  That  is  all  right. 

Mr.  Keller.  The  figures  and  facts  I  will  give  you  are  for  the  United 
States  plants  only  and  not  for  any  foreign  plants  in  Canada,  England, 
and  other  countries.  We  have  20  plants  in  use.  We  are  using  17 
million  square  feet  of  Chrysler-owned  property.     We  are  renting 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8593 

iy2  million  square  feet  from  other  private  owners.  We  are  operating 
liy2  million  feet  of  Government- owned  property,  put  up  especially 
for  the  war.  That  makes  30  million  square  feet  in  total  use.  This 
property  is  on  thirty-three  hundred  acres  of  Chrysler-owned  land 
and  eleven  hundred  acres  of  Government- owned  land.  Of  course, 
the  plants  we  rent  are  on  land  owned  by  the  people  from  whom 
we  rent  them. 

In  addition  to  the  above  acreage  we  have  a  contract  to  operate  an 
ordnance  depot  that  has  23,000  acres.  That  is  only  a  management 
contract  and  I  do  not  think  the  area  is  significant.  At  the  present 
time  we  have  106^600  employees.     At  the  end  of  1941  we  had  71,600. 

Now ;  we  have  negotiated  195  Government  war  contracts,  some  are 
supply  and  some  facility ;  103  of  these  contracts  are  completed.  Nat- 
urally, they  are  the  smaller  facility  contracts.  We  have  92  contracts 
in  force  at  the  present  time.  Our  total  contractual  arrangements 
with  the  Government  from  the  beginning  of  this  emergency  have 
amounted  to  $2,917,000,000,  and  these  103  completed  contracts 
amounted  to  $264,000,000,  so  we  have  in  force  uncompleted  con- 
tracts with  a  total  face  value  of  $2,653,000,000,  and  on  these  con- 
tracts that  are  still  in  force  we  have  filled  $1,250,000,000  of  the  con- 
tracts, and  we  still  have  unfilled  $1,400,000,000. 

On  these  in  force  contracts — these  92 — we  have  $56,000,000  in 
accounts  receivable — that  is,  in  vouchers  outstanding  in  the  hands  of 
the  Government.  We  have  $467,000,000  in  commitments  with  sup- 
pliers, and  $134,000,000  of  inventory  in  our  plants.  That  is  a  pro- 
ductive material  inventory.  In  addition  to  that,  we  are  custodians 
of  $228,000,000  of  Government  facilities. 

Now,  these  contracts  divide  as  follows:  With  the  Army  we  have 
$1,243,000,000  of  fixed  price  contracts,  and  $880,000,000  of  fixed  fee 
contracts.  With  the  Navy  we  have  $15,000,000  of  fixed  price  and 
$326,000,000  of  fixed  fee.  With  the  Defense  Plant  Corporation  we 
have  $189,000,000  of  cost,  no  fee.  So  that  adds  up  to  $1,258,000,000 
of  fixed  price  contracts  and  $1,206,000,000  of  fixed  fee  contracts,  and 
$189,000,000  of  cost,  no  fee,  contracts. 

To  split  that  up  by  the  services  means  that  our  contracts  with  the 
Army  amount  to  $2,123,000,000  and  with  the  Navy  to  $341,000,000,. 
and  with  the  Defense  Plants  Corporation,  $189,000,000,  which  you 
will  find  will  total  to  the  $2,653,000,000. 

Now,  of  course,  one  of  the  important  things  is  to  get  your  money. 
We  currently,  as  of  the  end  of  September,  are  working  on  fee 
contracts  with  a  face  value  of  $1,206,000,000.  We  had  $46,000,000 
in  billing  preparation  in  our  own  accounting  departments.  This 
money  has  been  spent  and  bills  are  being  prepared  to  be  passed 
over  to  the  services.  We  have  billed  $381,000,000  to  the  services: 
We  have  had  359  million  of  that  381  audited  by  the  services,  which 
clears  it  for  payment,  and  128  million  of  the  381  million  billed  has 
been  audited  by  the  General  Accounting  Office.  In  working  these 
contracts  they  are  not  treated  as  whole  units  but  are  broken  down 
for  various  plants.  In  most  cases  they  are  distributed  throughout 
our  plants,  so  that  as  many  as  five  or  six  of  our  plants  will  be  work- 
ing on  one  of  the  contracts. 


8594     INVESTIGATION   OF    THE    NATIONAL    DEFENSE   PROGRAM 

The  Chairman.  You  have  a  lot  of  subcontractors  in  addition  to 
that? 

Mr.  Keller.  Oh,  yes,  sir,  but  take  our  Dodge  plant,  for  instance 

Senator  Ball  (interposing).  May  I  go  back  to  that  381  million 
figure  that  you  billed  the  Government?     Have  you  any  of  that  yet? 

Mr.  Keller.  Oh,  yes;  we  have  gotten  a  great  deal  of  it.  I  think 
we  have  only  56  million  of  outstanding  vouchers,  accounts  receivable 
from  the  Government. 

Senator  Ball.  They  pay  before  it  is  audited  by  the  General  Ac- 
counting Office  ? 

Mr.  Keller.  Yes,  they  do;  but  that  does  not  mean  we  keep  the 
money.  That  is  one  of  our  problems,  although  I  think  we  are  in 
pretty  fair  shape  in  the  General  Accounting  Office  considering  the 
whole  problem. 

.  Senator  Ball.  The  56  millions  of  accounts  receivable,  plus  the  134 
millions  of  inventory,  add  up  to  about  200  million  that  you  have  rep- 
resenting liquid  capital  in  the  contracts. 

Mr.  Keller.  Of  course,  we  have  a  lot  of  equipment  and  buildings 
in  this  thing,  too.     You  mean  fluid  capital  ? 

Senator  Ball.  That  is  in  inventory  and  finished  goods  for  which 
you  have  not  been  paid. 

Mr.  Keller.  As  of  a  certain  date,  yes.  They  stand  for  just  what 
they  are :  56  millions  of  vouchers,  of  course,  that  we  have  outstanding 
to  be  paid.  There  are  46  million  in  billings  that  have  not  been 
submitted  to  the  services  yet. 

Senator  Ball.  That  is  not  included  in  the  134  ? 

Mr.  Keller.  Not  necessarily,  because  some  of  the  stuff  comes  in 
and  is  used  quickly. 

Senator  Ball.  I  was  trying  to  get  a  picture  as  to  how  much  your 
company  would  have  tied  up  in  inventory  and  finished  goods  if  your 
contract  were  suddenly  canceled  tomorrow. 

Mr.  Keller.  I  am  not  prepared  to  give  that.  That  is  quite  a 
study.  You  could  only  get  it  if  you  surveyed  your  commitments. 
Our  commitments  to  suppliers  are  $467,000,000,  so  what  proportion 
of  that  would 

Senator  Ball  (interposing).  Are  those  commitments  at  all  contin- 
gent on  your  contracts  remaining  in  force?  Can  you  cancel  your 
commitments  if  the  Government  cancels  ? 

Mr.  Keller.  They  carrv  about  the  same  provisions  that  our  con- 
tracts carry,  of  course.  We  try  to  control  them  so  that  the  suppliers 
do  not  run  out  the  whole  $467,000,000  at  one  time,  and  a  survey  we 
made  some  time  aj?o  indicated  that  their  phj^sical  work  in  process 
represented  about  half  the  commitment.  As  we  get  near  the  end -of 
the  picture  that  will  change  and,  of  course,  that  467  million,  as  far 
as  the  suppliers  are  concerned,  does  not  go  back  to  the  beginning  of 
the  contract.     That  is  current. 

Senator  Ball.  Then  you  have  230  millions  of  inventory  in  your 
suppliers  and  something  over  200  million  in  your  own  plant? 

Mr.  Keller.  I  could  not  say  that  definitely.  You  can  assume 
that. 

Senator  Ball.  In  other  words,  about  500  millions  of  work  in 
progress? 

Mr.  Keller.  I  would  say  that  is  right,  quite  roughly. 


INVESTIGATION   OF   THE   NATIONAL    DEFENSE    PROGRAM     8595 

Senator  Wallgren.  Mr.  Keller,  how  does  your  wartime  operation, 
as  far  as  volume  is  concerned,  compare  with  your  peacetime  business  ? 

Mr.  Keller.  I  think  in  our  last  statement  we  were  running  at  the 
rate  of  900  millions  a  year.  We  have  had  peacetime  operations  run- 
ning that  large. 

Senator  Wallgren.  Your  industry  has  not  been  blown  up  as  much 
as  some? 

Mr.  Keller.  Not  on  dollar  value,  but  the  type  of  our  industry  is 
completely  changed. 

Senator  Wallgren.  Did  you  give  us  a  figure  as  to  how  many  em- 
ployees you  have? 

Mr.  Keller.  One  hundred  and  six  thousand  six  hundred,  as  against 
seventy-one  thousand  six  hundred. 

Senator  Wallgren.  I  see. 

Mr.  Keller.  To  give  you  some  idea  as  to  how  this  work  is  dis- 
tributed physically  through  these  plants,  in  the  Dodge  plant  they 
are  operating  on  16  fee  contracts  and  22  price  contracts.  The  Chrys- 
ler plant  is  operating  on  5  fee  and  15  price  contracts.  DeSoto  has 
3  fee  and  3  price.  Plymouth  has  4  fee  and  1  price.  Engineering 
is  working  at  the  present  time  on  12  fee  and  23  price  contracts. 
Evansville  has  2  fee  and  no  fixed  price,  and  at  the  California  plant 
there  are  no  fee  contracts  and  6  Drice  contracts. 

The  Chairman.  Are  you  having  the  same  manpower  trouble  all  the 
rest  of  the  plants  are  having  ? 

Mr.  Keller.  Look  at  our  record  with  the  War  Labor  Board  and  you 
will  know  we  have  had  some  trouble. 

The  Chairman.  I  mean  obtaining  the  necessary  manpower  to  keep 
the  plants  in  operation. 

Mr.  Keller.  We  have  some  spotty  situations  on  that,  but  we  manage 
to  get  over  them.    It  is  not  a  comfortable  situation. 

Mr.  Fulton.  Will  you  tell  us  something  of  the  nature  of  the  changes 
that  have  had  to  be  made  in  the  business  done  by  the  company.  I 
don't  mean  dollarwise. 

Mr.  Keller.  I  think  this  next  item  will  give  you  a  pretty  fair  ex- 
ample. We  own  20,665  machine  tools,  and  we  converted  17,909  of 
those  tools  to  war  work.  Some  of  those  conversions  meant  as  much  as 
1,000  hours  of  work  per  machine  to  convert  them. 

Mr.  Fulton.  That  means  also  that  many  of  them  have  had  their 
locations  changed. 

Mr.  Keller.  They  are  all  moved ;  yes,  sir.  We  haven't  anything  that 
looks  like  an  automobile  line  any  more ;  2,347  of  our  pieces  of  equip- 
ment that  could  not  be  converted  to  any  of  the  war  work  that  came 
along,  and  no  other  supplier  came  and  asked  for  them,  even  though 
they  were  listed,  and  you  can  readily  understand  that  they  are  fixed 
center  drills  of  a  particular  pattern,  and  things  of  that  nature. 

In  addition  to  that  we  have  19,277  machine  tools  that  are  owned  by 
the  Government,  so  you  can  see  from  a  machine  shop  standpoint  that 
our  work  is  doubled. 

Mr.  Fulton.  You  succeeded  in  making  a  really  very  high  con- 
version, percentagewise,  of  your  tools  to  Government  work. 

Mr.  Keller.  We  think  we  did  a  splendid  job  on  that. 

Mr.  Fulton.  That  must  be  about  60  percent  ? 

Mr.  Keller.  It  runs  around  89  percent. 


8596     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 
PROBLEMS  OF  CONVERSION  FROM  WAR  PRODUCTION 

Senator  Ferguson.  Can  you  do  the  same  thing  in  converting  to- 
civilian  production  if  you  have  the  time? 

Mr.  Keller.  Yes,  sir ;  we  can  convert  those  machines  back  to  civilian 
production. 

Mr.  Fulton.  Did  you  also  have  the  problem  as  to  how  many  of  those 
19,000  Government  machines  would  be  of  use  to  you  or  how  many  you 
could  acquire  or  under  what  terms  ? 

Mr.  Keller.  That  is  a  very  important  thing.  You  might  be  in- 
terested to  know  that  of  these  19,000  Government-owned  machines, 
8,980  are  on  Chrysler  automobile  floor  space;  1,857  are  in  the  tank 
arsenal,  and  8,438  are  in  the  Dodge  Chicago  plant. 

Senator  Ferguson.  In  other  words,  Mr.  Keller,  if  you  couldn't  get 
these  Government  machines  moved  out  of  the  way  for  work  on  your 
peacetime  industry,  you'd  be 

Mr.  Keller.  We'd  be  in  a  hell  of  a  shape.  You  might  be  interested 
to  know  that  to  store  these  8,900  machines  will  take  2%  million  square 
feet  of  floor  space. 

Senator  Ball.  And  that  is  just  8,000  of  them? 

Mr.  Keller.  Practically  9,000  in  our  automobile  space  alone  in  De- 
troit and  Evansville,  and  that  would  take  2%  million  square  feet  of 
floor  space,  so  when  you  talk  about  using  aircraft  plants  for  storing 
machine  tools,  you  haven't  scratched  the  surfaces. 

Mr.  Fulton.  That's  just  storing  them? 

Mr.  Keller.  Leaving  enough  aisle  room  to  get  in  and  look  at  them. 

Senator  Ferguson.  The  actual  taking  them  out  is  an  enormous  job. 

Mr.  Keller.  It  will  cost  $3,000,000  to  gather  them  together,  put  them 
on  skids  and  move  them  to  a  storage  warehouse. 

Mr.  Fulton.  Have  there  been  any  discussions  between  the  company 
and  the  War  or  Navy  Depa  rtments,  or  could  there  be  any,  that  might 
be  helpful  in  determining  how  to  dispose  of  those  tools? 

Mr.  Keller.  We  have  had  office  discussions  and  a  questionnaire  from 
the  Ordnance  Department  with  regard  to  the  tank  arsenal,  and  Gen- 
eral Campbell  and  I  had  a  discussion.  He  asked  me  sometime  ago 
whether  I  had  any  ideas  on  this  equipment.  Of  course,  that  brings  me 
to  my  pet  subject,  and  that  is  that  I  certainly  hope  we  can  find  a  way  to 
handle  the  physical  phases  of  this  reconversion  just  as  soon  as  they  can 
be  handled,  without  perhaps  so  much  relation  to  the  total  problem.  I 
happen  to  have  been  one  of  the  boys  that  had  to  work  diligently  settling 
some  corporation  contracts  with  the  Government  after  cancelation 
after  the  last  war,  and  the  program  of  getting  inventories  and  getting 
a  full  claim  filed  and  then  having  it  passed  on  before  you  can  begin 
to  move  anything,  certainly  darns  up  the  stream.  But  with  that  in 
view,  I  outlined  a  very  simple  program,  for  instance,  on  machine  tools. 

Now,  when  you  bear  in  mind  that  it  will  cost  you  an  average  of 
around  $300  to  pick  up  a  machine,  get  all  of  its  parts  together,  clean 
it  up  and  put  it  in  order  for  storing,  skid  it,  move  it,  load  it  or  put  it 
in  another  warehouse,  there,  is  quite  a  bit  of  money  involved  in  a 
program  of  that  kind.  I  think  that  some  places  will  no  doubt  have 
a  lesser  problem,  some  places  where  you  have  mostly  light  equipment 
that  would  not  cost  anywhere  near  that  figure.  But  taking  the  aver- 
age of  our  Government-owned  equipment,  we  figure  it  will  average 
up  about  $300  a  machine — maybe  a  little  more. 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8597 

It  would  seem  to  me  that  the  Government  could  determine  right 
now  a  fair  price  for  these  machines  and  sell  a  lot  of  this  equipment 
without  hurting  the  war  effort.  These  machine  tools  run  into  two 
classes :  One  so-called  standard,  or  machines  that  are  adaptable  to 
most  any  line  of  manufacture ;  and  then,  of  course,  the  highly  special- 
ized machines  like  the  gun  barrel  drilling  machines  that  industry  in 
general  would  have  no  use  for.  But  if  the  services  could  determine 
on  a  fair  price  at  which  this  equipment  could  be  sold,  I  think  we  would 
be  willing  to  pick  out  the  equipment,  the  machines  that  we  would  like 
to  retain  in  our  industry,  thereby  perhaps  releasing  machine  tools 
of  much  older  vintage.  Many  of  the  machine  tools  could  be  sold  to 
people  who  are  willing  to  pay  for  them  now  and  still  leave  them  on 
the  war  contract  until  it  is  completed,  or  as  long  as  the  emergency 
exists. 

But  if  a  program  could  be  started  so  that  you  could  move  some  of 
this  machinery  to  the  industries  now  using  it,  it  would  take,  I  think, 
a  lot  out  of  the  problem  of  reconversion  and  also  disposition  when 
the  final  termination  comes. 

Mr.  Fulton.  It  would  enable  you  to  make  your  plans  for  produc- 
tion based  on  what  you  really  expected  to  have  to  work  with. 

Mr.  Keller.  Very  much;  yes,  sir.  In  some  cases,  where  you  work 
three  shifts,  you  might  want  to  expand  your  equipment  and  go  on  a 
two-shift  basis  after  the  war. 

Senator  Ferguson.  Mr.  Keller,  you  don't  think  that  the  doing  of 
that  now  would  in  any  way  interfere  with  the  war  effort  ? 

Mr.  Keller.  Not  at  all,  Senator.  It  would  simply  mean  that  cer- 
tain machinery  that  is  on  defense  plant  or  service  account  at  the 
present  time — they  are  all  numbered — would  pass  over  to  us,  and 
we  would  pay  for  them,  but  still  use  them  on  the  job.  After  the  war 
we  would  know  just  exactly  which  ones  we  would  have  to  move  out 
and  which  ones  we  Could  keep. 

Senator  Ferguson.  It  would  simplify  the  program  ? 

Mr.  Keller.  Yes,  sir;  and  after  the  war  any  machinery  we  didn't 
take,  you  could  offer  to  industry  in  general  at  those  prices. 

Mr.  Fulton.  Or  offer  it  now,  after  you  have  indicated  your  desire 
not  to  take  it  subject  to  delivery  after  the  war  ? 

Mr.  Keller.  The  thing  you  have  to  do  is — and  it  is  very  impor- 
tant— the  services  should  make  up  their  minds  what  they  want  to 
retain.     I  think  that  is  the  first  thing  that  should  be  done. 

As  a  case  in  point,  our  tank  arsenal  was  put  up  with  the  thought 
in  mind  that  the  Government  would  have  an  integrated  arsenal  where 
they  could  develop  and  build  tanks  for  all  time.  There  seemed  to  be 
a  deficiency  in  the  general  arsenal  setup  for  that  kind  of  activity, 
and  tanks  had  come  to  be  such  a  prominent  thing  in  the  war  effort 
that  the  plant  was  laid  out,  designed,  and  equipped  with  the  idea  in 
mind  that  the  Government  would  continue  to  keep  it  as  an  arsenal. 
That  idea  only  reached  the  phase  of  an  expression  of  the  desirable  thing 
to  do,  and  had  some  influence  on  the  way  the  contract  was  written, 
but  as  far  as  I  know,  there  is  no  definite  decision  that  that  is  what  the 
Government  is  going  to  do. 

Of  course,  with  a  great  increase  in  production,  that  plant  isn't  set 
up  as  a  well-integrated  plant  any  more.  Some  of  the  work  of  the  tank 
arsenal  has  been  distributed  through  our  own  plants.  We  have  about 
2,000,000  square  feet  of  our  own  property  on  tank  work  and  1,100,000 


8598     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

feet  of  Government  property,  so  that  the  plant  should  again  be  laid 
out.  A  layout  study  should  be  made  and  machinery  selections  made 
from  the  Government-owned  equipment  now,  that  when  put  back  in 
that  plant  would  make  a  complete  plant  so  they  could  keep  on  with 
the  development  and  manufacture  of  tanks  in  limited  quantity. 

Mr.  Fulton.  I  suppose  fundamentally  that  would  also  go  for  the 
entire  17,000,000  square  feet  of  Government  plant. 

Mr.  Keller.  It  is  liy2  million  square  feet  of  Government-owned 
property. 

Mr.  Fulton.  Which  you  would  like  to  know  whether  the  Govern- 
ment wants  to  keep  or  wants  to  make  available  for  possible  purchase. 

Mr.  Keller.  That  is  true.  Of  course,  the  Dodge  Chicago  plant 
takes  over  half  of  that  in  one  bite. 

Mr.  Fulton.  That  is  the  big  engine  plant. 

Mr.  Keller.  Yes,  sir. 

Mr.  Fulton.  Would  you  have  any  use  for  that  in  civilian  work? 

Mr.  Keller.  I'd  hate  to  answer  that  question  now.  I  don't  know 
how  big  civilian  work  is  going  to  be  and  I  don't  know  what  price  they 
would  ask  for  it. 

Mr.  Fulton.  You  would  have  to  be  given  a  lot  more  information  be- 
fore you  could  make  an  intelligent  decision  in  behalf  of  the  company  ? 

Mr.  Keller.  Correct;  yes,  sir. 

Mr.  Fulton.  In  general ,  if  you  could  be  told  the  machine  tools  you 
could  buy  and  the  terms  on  which  you  could  buy  them  you  would  like 
to  go  over  those  lists,  select  many  of  them,  reject  others,  and  make 
them  available,  to  other  industrialists  who  might  have  some  use  for 
them. 

Mr.  Keller.  That  is  right ;  buy  them  now. 

Mr.  Fulton.  And  as  far  as  the  plants  are  concerned,  at  least  it 
would  be  helpful  if  discussions  could  be  entered  into  to  get  a  little 
more  certainty  on  the  terms  on  which  they  might  become  available? 

Mr.  Keller.  Correct. 

Mr.  Fulton.  Some  of  them  you  might  be  able  to  use;  some  you 
might  not. 

Senator  Kilgore.  For  the  record,  taking  the  machine  tools  now  on 
plant  space,  not  on  Government-owned  space,  approximately  what 
percentage  of  those  could  be  used  in  your  commercial  business  after 
the  war,  leaving  out  of  consideration  the  Army's  determination  to 
use  any  of  them?  Of  the  total  number,  what  percentage  would  be 
usable  or  advantageous? 

Mr.  Keller.  Senator,  that  is  about  the  most  complicated  question 
you  could  ask  me,  because  the  automobile  industry  leans  to  specialized 
equipment. 

Senator  Kilgore.  I  know  it  does. 

Mr.  Keller.  And  the  specialized  equipment  on  the  Government 
stuff  is  of  no  use  to  us  because  it  won't  fit  the  specialized  requirements 
of  the  automobile  set-up,  so  when  you  get  down  to  your  standard  equip- 
ment  

Senator  Kilgore  (interposing).     That  is  what  I  was  after. 

Mr.  Keller.  And  your  standard  equipment  would  be  largely  deter- 
mined by  your  need  for  that  type  of  equipment,  your  probable  use 
for  it  and  the  prices  under  which  you  could  get  it,  whether  it  would 
pay  you  to  buy  it  or  not. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8599 

Senator  Kilgore.  What  I  was  getting  at  was  the  question  of  util- 
ization of  this  equipment.  In  other  words,  what  percentage  is  adapt- 
able. 

Mr.  Keller.  We  made  a  quick  survey  and  there  was  something 
between  three  and  four  thousand  machines,  Government-owned, 
that  we  thought  we  would  like  to  own  if  we  could  get  them  under  the 
right  circumstances.  We  might  expand  that  if  prices  were  proper 
and  reasonable;  we  might  throw  out  some.  When  you  get  on  that, 
shady  line  of  the  productivity  of  the  piece  of  equipment 

Senator  Kilgore  (interposing).  As  to  whether  it  is  cheaper  to 
make  the  changes  or  to  buy  something  new. 

Mr.  Keller.  That's  right. 

Senator  Kilgore.  I  realize  that,  but  my  question  was  aimed  at  the 
point  of  how  much  of  this  type  of  machinery  we  have  that  is  so 
specialized  that  it  would  be  uneconomical  to  attempt  to  convert  it  to 
normal  peacetime  uses. 

Mr.  Keller.  I  think,  so  far  as  our  plants  are  concerned,  75  percent 
would  be  economical  to  use  somewhere,  but  when  you  get  into  big  bor- 
ing mills  it  is  a  question  whether  there  is  enough  capacity  even  to  use 
them  unless  enough  peacetime  work  can  be  had,  but  as  a  machine  and 
a  type  of  machine  they  are  usable  I  would  say  fully  75  percent.  That 
is  strictly  the  machine  tools  themselves. 

Senator  Kilgore.  That  is  what  I  wanted. 

Mr.  Keller.  I  think  it  would  be  a  great  thing  for  industry  in  this 
country  as  a  whole  to  be  modernized.  Instead  of  picking  up  these 
machines  at  around  $300  to  move  them  somewhere,  without  including; 
freight,  and  $300  more  to  get  them  out  and  get  them  some  place  where 
you  are  going  to  use  them,  plus  storage,  they  should  be  disposed  of 
early  so  that  they  will  go  into  the  hands  of  manufacturers  all  over 
the  United  States.  It  would  raise  the  general  level  and  quality  of" 
productivity  in  this  country. 

Senator  Kilgore.  Don't  you  think  it  would  be  good  national  econ- 
omy to  utilize  all  this  machine-tool  equipment  that  can  be  done,  and 
distribute  it  direct  from  the  Government  to  industry  to  raise  the  level 
of  our  tooling  all  over  the  country  from  the  small  shop  to  the  big  shop 
and  make  it  available  to  everybody  if  they  can  use  it  ? 

Mr.  Keller.  Yes,  sir. 

Senator  Kilgore.  And  get  rid  of  the  junk  tools  that  are  turning 
out  inefficient  work? 

Mr.  Keller.  In  general  that  is  a  good  scheme.  Otherwise  you  make 
that  a  laborious  task  by  putting  them  on  the  market  for  offer  in  large 
blocks. 

Senator  Wallgren.  However,  you  will  never  be  able  to  use  all  the 
machines  you  have. 

Mr.  Keller.  Why  not? 

Senator  Wallgren.  You  have  too  many  of  them  in  all  plants  in 
the  country. 

Mr.  Keller.  Do  you  think  so  ? 

Senator  Wallgren.  You  would  think  so  from  the  way  we  have 
been  producing. 

Mr.  Keller.  I  have  been  working  around  machine  shops  for  35 
years,  even  longer  than  that,  and  from  what  I  see  of  some  of  our 
suppliers  and  machine  shops  in  general  there  is  a  big  need  for 
modernization. 


8600     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

The  Chaikman.  I  think  we  can  use  them  all. 

Mr.  Keller.  I  think  most  of  the  standard  tools  could  be  put  into 
use  and  older  machines  scrapped  and  do  a  better  job. 

Senator  Kilgore.  You  feel  also  that  this  specialized  stuff  could  be 
well  used  by  an  experimental  branch  of  the  Army  to  carry  on  ex- 
perimental assembly  lines  in  tanks  and  self-propelled  artillery  and 
things  of  that  kind  ? 

Mr.  Keller.  We  have  100  and  some  drilling  machines  for  gun  bar- 
rels and  that's  a  hell  of  a  lot  of  drilling  machines  for  the  Army  for  ex- 
perimental work,  but  I  think  the  arsenals  should  be  equipped  with  the 
most  modern  machines.  It  would  be  a  good  program  to  study  the 
arsenals  and  pick  out  the  machinery  they  could  use  for  modernizing. 
When  I  went  to  Rock  Island  I  was  appalled  at  some  of  the  equipment 
used  out  there.  I  was  in  Canada  and  I  looked  over  a  tank  plant  up 
there  in  the  early  part  of  the  war,  and  they  had  machinery  there  that 
was  obsolete  when  1  started  to  serve  my  apprenticeship. 

Mr.  Fulton.  When  you  say  this  would  modernize  plants,  you  mean 
in  addition  to  increasing  productivity  it  would  have  the  result  that 
always  follows,  namely,  consumers'  goods  would  be  produced  in 
greater  volume  at  ]ess  price. 

Mr.  Keller.  It  would  make  a  better  quality  of  output  all  around. 
It  doesn't  take  much  imagination  to  realize  that  a  lathe  with  a  hy- 
draulic feed  will  give  you  a  much  finer  job  than  some  of  the  screw 
type  that  we  have  been  using  for  maybe  40  years  in  this  country. 

Mr.  Fulton.  But  translating  that  into  meaning  for  the  public,  that 
means  people  will  get  better  goods  for  less  money,  and  more  of  them. 

Mr.  Keller.  I  think  there  are  a  lot  of  other  factors  that  go  into 
what  the  money  value  of  the  goods,  would  amount  to,  but  studying  it 
as  a  purely  equipment  problem  the  country  is  going  to  come  to  it  any- 
way. If  you  want  to  have  prosperity  in  the  country  you  can't  afford 
to  hold  onto  obsolete  equipment.  It  s  a  case  of  taking  the  machinery 
you've  got  and  using  it  to  pick  up  the  country  in  a  year's  time  instead 
of  letting  modernization  take  12  or  15  years. 

Mr.  Fulton.  When  you  speak  of  a  way  of  selling  this  and  you  refer 
to  the  complications  that  would  be  involved  for  every  different  pur- 
chase and  every  different  tool  if  an  offer  had  to  be  made,  have  you 
any  suggestion  as  to  some  alternative  method,  as  perhaps  classifying 
tools? 

Mr.  Keller.  These  tools  are  generally  known ;  that  is,  the  tools  are 
known  by  the  manufacturers'  nomenclature :  No.  1  Cincinnati  mill  or 
No.  3  or  No.  4  or  No.  2  vertical ;  take  a  6  by  38  Norton  grinder  or  Landis 
grinder  and  everybody  in  the  industry  knows  what  those  things  are. 

Mr.  Fulton.  So  that  you  think  they  could  be  classified  and  then 
priced  as  a  group,  rather  ? 

Mr.  Keller.  Priced  individually.  This  is  what  will  you  take  for 
a  machine. 

Senator  Ball.  How  would  you  do  that  ? 

Mr.  Keller.  I  would  go  back  to  the  pre-war  price.  I  wouldn't 
attempt  to  price  them  on  the  basis  of  inflated  cost  due  to  excessive 
overtime  and  Sunday  work,  which  is  around  35  percent  or  40  percent 
increase.  I  think  on  those  standard  tools,  according  to  some  observa- 
tions I  have  made,  1937  value  selling  prices  were  65  to  70  percent  of 
the  current  prices,  and  then  there  should  be  some  depreciation  for  the 
years  of  use  they  have  had  on  top  of  that. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8601 

Senator  Ball.  I  was  going  to  ask  you  this.  _  Internal  Kevenue  have 
pretty  standard  rates  of  depreciation  on  machine  tools  ■;  haven't  they  ? 

Mr.  Keller.  Yes,  they  have;  but  don't  forget  you  have  got  some 
certificates  of  necessity  that  are  allowing  20  percent  a  year  depre- 
ciation. 

Senator  Ball.  Of  course,  I  think  it  should  be  pretty  high  during 
the  war. 

Senator  Ferguson.  You  have  been  working  them  much  harder, 
haven't  you  ? 

Mr.  Keller.  Oh,  yes;  we  have  been  working  them  very  hard,  and 
it  is  a  lot  different  from  the  average  of  the  general  use  of  machines, 
and  there  has  been  less  upkeep  on  them  on  account  of  the  manpower 
situation.     It  is  pretty  hard  to  keep  them  up. 

Senator  Ball.  Actually  it  wouldn't  be  such  a  tough  job  for  men 
who  know  machine  tools  to  fix  a  pretty  standard  formula  for  pricing 
these  machines.  I  mean  you  can't  go  out  and  price  every  one  in- 
dividually ;  you'd  go  nuts. 

Mr.  Keller.  It  wouldn't  be  very  hard  to  do,  Senator  Ball.  You 
wouldn't  want  to  relate  it  entirely  to  the  price  that  was  paid  for  them 
but  to  the  model  and  size  and  type,  because  some  of  these  machines 
have  special  kinds  of  attachments  that  were  fitted  to  the  war  that  are 
no  use  in  other  production. 

The  Chairman.  When  you  do  that,  what  are  you  going  to  do  to  the 
machine  tool  industry  as  an  industry  ? 

Mr.  Keller.  I  think  that  would  be  the  most  helpful  thing  to  do  for 
them,  to  put  these  machines  into  productive  use  quickly.  Certainly 
I  don't  believe  the  temper  of  the  American  people  will  allow  you  to 
take  good  machinery  out  and  scrap  it.  To  do  what  we  have  been  talk- 
ing about  certainly  would  be  a  much  better  program  than  we  had 
during  the  last  war  when  the  machines  were  sold  in  great  blocks  to 
people  who  got  them  at  scrap  prices,  stored  them  and  sold  some  of  the 
most  desirable  of  them  and  got  their  money  out  and  then  sat  with  the 
balance  as  a  blanket  over  the  machine-tool  industry  for  10  or  15  years. 

Senator  Kilgore.  Wouldn't  it  be  fatal  to  sell  this  on  a  basis  of  specu- 
lation this  time  and  should  it  not  be  sold  to  bona  fide  users  by  a  govern- 
mental agency  direct  ? 

Mr.  Keller.  Yes,  sir. 

Senator  Kilgore.  Isn't  that  the  only  safe  way  to  operate  the  post- 
war economy  on  machine  tools  ? 

Mr.  Keller.  Yes,  sir ;  and  I  would  set  a  minimum  price  less  than 
which  I  would  not  take.  I'd  scrap  them  before  I'd  take  less  than  the 
minimum  price. 

Senator  Ball.  And  make  that  considerably  above  the  scrap  value. 

Mr.  Keller.  Yes,  sir. 

Senator  Ball.  I  was  interested  in  that  $300  figure  you  gave  us. 
That  is  the  average  you  think  it  would  cost  just  to  get  a  machine  out 
of  your  plant.     That  doesn't  include 

Mr.  Keller  (interposing).  On  every  Government  machine  when 
you  get  an  invoice  on  it  you  have  some  wrenches  and  chucks  and  all 
of  these  gadgets  that  go  with  them.  You  have  to  find  all  of  those 
things  and  attempt  to  identify  them  and  to  box  them  up  as  a  unit. 
I  went  through  this  in  the  last  war  and  I  know  about  the  physical 
problem  of  doing  this  job.  You  have  got  to  gather  all  that  stuff  to- 
gether, clean  that  machine  out  thoroughly ;  you  have  to  grease  it  and 

311932 — 44— pt.  21 7 


8602     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

inspect  it  and  see  that  everything  is  with  it ;  you  have  to  skid  it ;  you 
have  to  move  it  to  the  platform  and  either  load  it  on  a  ear  or  have 
somebody  cart  it  over  to  an  adjacent  warehouse,  and  you  have  to  set  it 
in  there,  and  you  have  got  to  get  it  all  together. 

Senator  Ball.  But  actually  that  $300  would  get  it  out  of  your  plant 
and  into  the  railroad  car. 

Mr.  Keller.  Into  the  railroad  car ;  yes. 

Senator  Ball.  It  doesn't  include  transportation  ? 

Mr.  Keller.  No  transportation  except  a  slight  amount  of  trucking 
close  by. 

Senator  Ball.  Or  unloading  and  setting  it  in  the  warehouse  ? 

Mr.  Keller.  No,  if  you  put  it  on  a  railroad  car  you  have  trans- 
portation and  handling  at  the  other  end. 

Senator  Ball.  And  transportation  would  be  heavy. 

Mr.  Keller.  It  depends  on  the  distance. 

Senator  Ball.  What  I  was  trying  to  get  at  was  how  much  the  Gov- 
ernment would  save  in  the  long  run  if  they  had  sold  those  machines  to 
the  manufacturer  using  them  as  they  stand. 

Mr.  Keller.  They  would  save  the  cost  of  that  storage  space  and  that 
$300. 

Senator  Ball.  What  would  be  the  average  storage  cost  ?  Have  you 
any  idea  ? 

Mr.  Keller.  You  can  divide  practically  9,000  machines  into  2% 
million  feet  and  that  will  give  you  your  footage  area  per  machine  and  I 
don't  know  what  it  is  worth. 

Senator  Ball.  Warehouse  space  is  about  75  cents  to  $1  a  foot. 

Mr.  Keller.  When  there  is  a  lot,  it  is  cheap,  and  when  there  is  none 
you  can't  get  it  for  love  nor  money. 

Senator  Ferguson.  Mr.  Keller,  you  brought  up  the  question  of  the 
future  in  peacetime.  You  are  optimistic  that  we  can  use  these  ma- 
chines and  have  great  production  in  the  future?  You  are  not  pessi- 
mistic on  that  question  ? 

Mr.  Keller.  We  were  raised  in  competition.  We  came  into  the  busi- 
ness in  competition  and  all  we  want  is  to  start  with  the  gun  with  the 
rest  of  them  and  we  think  we  can  take  care  of  ourselves. 

Senator  Ferguson.  The  future  looks  all  right  for  the  whole  country 
as  far  as  you  are  concerned  ? 

Mr.  Keller.  For  the  automobile  business,  anyway.  We  are  going 
to  need  a  lot  of  them.  In  fact,  the  biggest  concern  I  have  is  whether  we 
are  going  to  have  enough  tires  to  handle  them. 

Senator  Ferguson.  But  it  will  be  important  that  the  companies  be 
given  an  equal  start. 

Mr.  Keller.  The  same  as  a  race,  yes. 

Senator  Ferguson.  If  you  allow  the  machinery  of  some  contracts  to 
remain  and  not  get  out,  and  allow  it  to  get  out  of  another  contract,  that 
would  be  a  serious  problem. 

Mr.  Keller.  I  have  some  things  on  that  that  might  be  of  interest  to 
you.  In  negotiating  a  lot  of  contracts  of  this  nature,  you  run  over  quite 
a  period  of  time,  naturally,  and  as  we  go  along  they  change  the  plans 
and  new  directives  come  out  and  different  things  happen.  You  may  be 
interested  in  this.  We  have  four  contracts  that  provide  that  Govern- 
ment-owned plant  equipment  cannot  be  removed  for  1  year.  We  have 
four  contracts  which  make  no  provision  with  respect  to  facilities.     For 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8603 

the  gyro  compass  and  the  equipment  in  the  Evansville  ordnance  plant 
a  90-day  period  is  allowed  before  disposal  of  facilities.  We  have  two 
contracts  providing  for  a  60-day  period.  We  have  three  truck  con- 
tracts that  provide  that  disposition  of  the  material  will  be  at  the 
option  of  the  contracting  officer. 

Senator  Ferguson.  That  may  take  any  period  of  time  ? 

Mr.  Keller.  Yes,  sir.  We  have  6  Navy  contracts  that  provide 
that  upon  audit  and  settlement  of  all  claims  Government  property 
is  to  be  prepared  and  shipped  at  the  Government's  direction.  We 
have  approximately  50  contracts  including  the  tank  and  most  of  our 
truck  contracts  and  the  gyro  contract  that  contain  no  provision  with 
reference  to  disposition  of  material.  We  have  10  Defense  Plant  Cor- 
poration leases  containing  provisions  that  if  the  Defense  Plant  Cor- 
poration at  the  request  of  the  contractor  has  not  moved  out  its  ma- 
chinery within  60  days  of  termination,  the  contractor  may  store  such 
machinery  anoT  equipment  at  the  expense  of  the  Defense  Plant  Corpo- 
ration. Of  course,  -that  doesn't  say  where  we  will  store  it.  Prior 
to  this  60-day  period,  an  option  period  of  90  days  is  available  during 
which  time  the  contractor  may  make  arrangements  to  purchase  the 
machinery  and  equipment. 

It  is  our  interpretation  of  these  contracts  that  this  option  period 
is  not  mandatory.     So  you  see  that  is  quite  a  complex  situation. 

Now,  there  has  been  a  great  deal  of  discussion  about  how  these 
things  are  going  to  work  out  and  whether  you  are  going  to  get  the 
money  and  what  the  financial  set-ups  are  going  to  be  and  whether 
the  General  Accounting  Office  has  to  finally  approve  before  you  can 
dispose  of  the  thing,  but  to  me,  the  real  problem  is  the  physical  move- 
ment of  this  stuff  with  dispatch,  because  all  these  other  problems  just 
relate  to  that.  I  remember  when  I  was  about  8  years  old  my  grand- 
mother gave  me  a  toy,  a  kaleidoscope  that  you  could  look  into  and 
see  beautiful  pictures,  but  after  I  looked  into  it  a  while  I  took  it  apart 
and  found  it  was  just  a  lot  of  pieces  of  broken  glass  of  different  colors, 
sizes  and  shapes.  If  we  take  the  machinery  and  say,  "That's  the  blue 
glass,"  and  start  moving  on  it  now,  and  take  the  jigs  and  fixtures, 
which  are  going  to  be  a  tremendous  problem,  and  one  of  the  most 
difficult  things  to  handle  in  the  last  war,  it  seems  to  me  that  after  the 
Government  has  decided  what  it  is  going  to  keep  in  the  way  of  facili- 
ties, those  jigs  and  fixtures  ought  to  be  moved  just  once,  from  where 
they  are  past  the  Government  man  who  will  identify  them  and  into 
the  scrap  pile  and  not  be  moved  into  the  yard  or  some  storage  warp- 
house  and  held  until  the  General  Accounting  Office  audits  them.  They 
are  scrap  and  they  are  not  worth  a  penny  on  the  dollar. 

Mr.  Fulton.  For  purposes  of  the  record,  when  you  say  "jigs  and 
fixtures"  you  mean  those  specialized  pieces  of  equipment? 

Mr.  Keller.  I  mean  those  things  you  make  that  you  put  on  a  ma- 
chine that  you  put  the  piece  in  that  holds  the  piece  and  guides  the  drills 
and  the  cutters. 

Mr.  Fulton.  That  is  only  useful  to  make  a  specific  article  of  that 
design  and  due  to  obsolescence  and  other  factors,  even  if  we  had  an- 
other war,  you  wouldn't  use  the  same  dies  and  jigs  and  fixtures;  is 
that  correct? 

Mr.  Keller.  I  will  give  you  this  experience  that  I  have  had.  Dur- 
ing the  last  war  our  Dodge  division  made  155-millimeter  howitzer 


8604     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

and  rifle  recoils  and  we  had  a  plant  in  Detroit  for  that  purpose — that 
was  a  Government  facility — and  Dodge  bought  that  plant.  That  was 
before  we  owned  the  Dodge.  Those  machines  and  fixtures  and  tools 
and  everything  that  goes  with  them  were  boxed  and  sent  to  Rock 
Island.  When  I  went  to  Rock  Island  to  look  at  the  tank  they  showed 
me  this  mass  of  equipment  that  was  still  out  there,  and  from  what  I 
know  of  the  machine-tool  practice  a  great  deal  of  the  approach  to  that 
job  and  even  the  design — perhaps  not  so  much  on  the  155  but  on  cannon 
in  general — of  recoil  has  completely  changed  in  this  25-year  period. 
So  I  think  it  is  a  question  of  whether  it  pays  to  hold  this  stuff  so  long. 

Mr.  Fulton.  If  you  were  making  the  decision  on  a  similar  problem 
for  your  own  company  you  would  scrap  the  jigs  and  dies  but  keep 
the  machine  tools? 

Mr.  Keller.  We  have  to  do  that  every  year.  Of  course,  so  far  as 
our  accounts  are  concerned,  we  scrap  the  dies  right  in  the  first  year 
of  use,  because  we  find  that  is  the  only  safe  thing  to  do  financially. 
There  are  generally  some  changes.  Then  we  determine  which  jigs 
and  fixtures  we  will  keep  for  service,  put  them  in  storage,  and  throw 
the  others  away.  As  you  come  into  our  office,  Senator  Ferguson,  you 
see  a  big  pile  of  them  out  there.  We  scrap  as  many  of  them  every  year 
as  we  can.  It  is  quite  a  problem.  Yet  that  pile  represents  not  over 
2  percent  of  the  jigs  and  fixtures  that  we  have  made  in  the  Chrysler 
Corporation  since  I  have  been  with  them. 

Senator  Ferguson.  The  services  could  do  the  same  thing  by  deter- 
mining what  jigs  and  fixtures  they  would  like  to  keep  for  future 
use. 

Mr.  Keller.  That  is  right.  I  want  to  put  the  emphasis  on  identify- 
ing them  by  number  and  scrapping  them  the  first  time  you  move  them. 
If  you  could  load  them  on  the  truck  and  go  past  that  fellow  and  he 
could  say  "That's  that,"  and  dump  them  into  the  cupola,  you  would  be 
money  ahead,  the  money  and  the  time  you  spend  storing  this  stuff, 
and  then  going  out  and  having  it  checked,  and  somebody  says,  "But 
there  are  three  nuts  missing  off  of  this  one,"  and  so  on.  During  the 
last  war  I  went  to  a  cheap  hardware  store  and  bought  a  lot  of  cheap 
wrenches  so  that  when  we  were  short  a  wrench  on  a  fixture  we  put 
one  on.  It  only  cost  a  few  cents  but  the  whole  thing  was  held  up 
on  account  of  a  wrench  we  couldn't  find.  It  didn't  seem  to  make  any 
difference  whether  the  wrench  fit  or  not,  so  we  just  put  a  wrench  with 
it  and  that  was  that. 

Senator  Ferguson.  In  other  words,  General  Accounting  couldn't 
tell  whether  it  fit  or  not. 

Mr.  Keller.  It  was  just  as  useful  for  the  purpose  as  any  other 
wrench  would  be. 

Talking  about  fixtures,  take  our  tank  plant :  Our  dies,  fixtures,  and 
special  tools  on  that  job  amount  to  $16,000,000 ;  the  building  cost  $8,000,- 
000,  and  we  have  $30,000,000  worth  of  machinery  on  that  contract,  so 
you  can  see  it  is  a  very  sizable  thing  from  the  standpoint  of  dollars, 
and  the  dies,  jigs,  and  fixtures  are  a  bulky  thing  when  you  come  to 
handle  them. 

The  Chairman.  Mr.  Keller,  have  you  given  any  thought  to  recon- 
version to  civilian  production  ? 

Mr.  Keller.  Very  little.  We  are  in  a  peculiar  position.  We  are 
still  being  importuned  to  take  on  more  war  work. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8605 

The  Chairman.  I  understand  that. 

Mr.  Keller.  The  starting  of  these  jobs,  getting  them  going.  Senator 
Truman,  takes  the  best  talent  we  have,  and  I  don't  believe  that  any 
thought  to  peacetime  is  worth  a  darn  unless  the  most  able  executives 
in  the  country  bend  their  attention  to  it,  and  for  this  war  effort  I  don't 
see  how  they  can  afford  to  do  it  with  the  problems  before  us. 

The  Chairman.  Your  answer  is  the  same  as  Mr.  Wilson's ;  now  is  not 
the  right  time  to  put  the  engineers  and  executives  on  that  sort  of  job. 

Mr.  Keller.  Absolutely,  yes.  I  have  had  friends  come  to  my  office 
from  other  industries,  very  able  young  fellows  come  down  to  talk  about 
post-war  plans,  but  plans  for  anything  have  to  be  made  at  the  top  of 
the  company  and  I  haven't  got  any  time  to  put  on  post-war.  There  are 
new  devices  that  are  crying  for  attention  in  this  country,  both  in  the 
Navy,  Ordnance,  and  Air,  that  require  the  very  best  attention  and  the 
very  best  people  we  have  in  this  country,  and  I  am  aware  meanwhile 
the  war  is  on. 

The  Chairman.  So  am  I. 

Mr.  Keller.  I  concentrate  on  it.  I  think  if  we  can  shorten  this  war 
by  1  month  it  will  mean  more  to  the  country  than  any  peacetime 
plan  you  can  work  up.  I  think  everything  should  be  directed  to  that 
purpose,  so  that's  the  best  answer  I  can  give. 

Senator  Ferguson.  That,  doesn't  mean  that  necessarily  this  plan  of 
getting  the  machinery  out  and  selling  it  can't  be  done? 

Mr.  Keller.  That  can  be  done  by  subordinates,  sir.  That  doesn't 
take  the  top,  but  in  lining  up  the  termination  of  these  contracts  or  even 
working  on  it  today  a  plan  should  be  made  so  that  the  stuff  physically 
moves  with  dispatch  and  that  responsibility  for  check  lies  with  the  first 
man  who  checks  it  and  isn't  subject  to  8  or  10  reviews  thereafter,  be- 
cause if  it  is,  just  as  soon  as  the  contractor  finds  it  out  he  is  going  to 
hold  the  stuff  until  he  gets  the  last  check. 

Senator  Ferguson.  He  is  taking  no  chances  of  being  in  trouble  with, 
the  Government. 

Mr.  Keller.  He  can't  afford  to. 

Now,  there  are  other  problems  connected  with  the  physical  side 
of  this  thing,  and  that  is  what  I  am  trying  to  devote  most  of  my 
time  to  because  I  think  I  know  that  the  best. 

We  have  10,075  pieces  of  office  equipment,  and  I  am  quite  sure 
that  is  beyond  anything  we  will  need.  That  alone  will  take  40,000 
feet.  It  doesn't  seem  like  very  much,  but  when  you  multiply  that 
by  your  war  effort  you  are  going  to  find  a  lot  of  desks  around  the 
country,  and  pieces  of  office  equipment. 

_  I  think  also  you  will  be  interested  in  the  tonnage  of  the  produc- 
tive material  in  all  states  of  operation.  We  ran  2  years  and  we 
thought  it  would  be  a  good  thing  to  have  an  inventory  and  see  where 
we  stood,  so  we  took  an  inventory  in  the  last  week  of  August,  and 
not  counting  our  Chicago  plant  at  all,  which  is  a  separate  facility 
and  isn't  interwound  with  our  other  automobile  plants,  we  found  we 
had  73,183  tons  of  material  in  process  at  the  plants.  You  would 
natural^  think  it  was  all  over  in  the  tank  arsenal  because  that  is 
heavy  armor,  but  it  is  surprising  that  there  are  only  28,700  of  those 
tons  in  the  tank  arsenal,  so  you  still  have  45,000  tons  in  our  auto- 
mobile plants.  Of  course,  that  doesn't  include  any  tonnage  that 
our  suppliers  have.     We  are  currently  using  about  10,000  suppliers. 

Senator  Wallgren.  How  many  subcontractors  do  you  have  ? 


8606     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Mr.  Keller.  We  call  them  suppliers.     We  have  10,000  now. 

Senator  Wallgren.  They  have  their  own  machinery? 

Mr.  Keller.  Yes,  and  some  of  them  have  Government  facilities. 
Of  course,  they  range  in  all  different  sizes  and  conditions.  Last 
night  I  asked  them  to  tell  me  how  many  of  them  we  are  currently 
doing  $10,000  a  month  or  more  with.  There  are  500  that  run  $120,000 
a  year  or  more.  Now,  that  number  of  larger  contractors  will  increase 
very  much  with  the  equipping  and  putting  in  production  of  the  Dodge 
Chicago  plant.  We  have  contractors  there  that  hold  very  large  con- 
tracts, but  up  to  date  have  shipped  very  little. 

Senator  Wallgen.  Were  many  of  these  suppliers  employed  by  you 
in  peacetime  operations? 

Mr.  Keller.  I  would  say  not  over  25  percent  of  them. 

Senator  Kilgore.  They  are  not  exclusive  suppliers  to  you?  A  lot 
of  them  furnish  to  others? 

Mr.  Keller.  That  is  right. 

Senator  Kilgore.  So  it  does  not  mean  Chrysler  has  10,000  of  its 
own? 

Mr.  Keller.  No,  but  we  have  to  deal  with  10,000  contracts  to  sup- 
pliers and  the  physical  side  of  handling  these  things  is  tremendous. 
While  the  dollars  in  volume  are  not  very  large,  9,500  of  them  will 
have  some  kind  of  claim  when  we  shut  them  off. 

Senator  Kilgore.  And  a  lot  of  them  in  turn  will  have  claims  with 
other  corporations. 

Mr.  Keller.  That  is  right,  and  some  of  the  big  ones,  of  course,  are 
going  to  have  quite  a  problem.  I  think  an  interesting  angle  that 
wasn't  very  well  brought  out  in  Mr.  Wilson's  testimony  was  when 
you  deal  with  these  contracts  and  you  talk  about  what  percent- 
ages are  in  fixed  fee.  For  instance  we  have  1,206,000,000  of  fixed- 
fee  contracts,  but  we  buy  a  great  many  pieces  under  those  fixed-fee 
contracts.  Those  pieces  are  bought  at  a  fixed  price  from  the  sup- 
pliers. We  have  very,  very  few  contracts  with  suppliers  that  are  not 
fixed-price  contracts. 

Senator  Ferguson.  Mr.  Keller,  your  contract  does  not  dictate  to 
you  how  you  should  buy  those  ? 

Mr.  Keller.  No,  it  does  not.  No,  we  have  some  dictation  after 
we  buy,  which  is  sometimes  very  annoying. 

Senator  Ball.  Mr.  Keller,  I  am  interested  in  that  78,000  tons  of 
material  in  process.  From  your  experience  in  the  last  war,  will  any 
sizable  proportion  of  that  be  usable? 

Mr.  Keller.  Very  little. 

Senator  Ball.  Very  little  ? 

Mr.  Keller.  Very  little.  Of  course,  your  aluminum  can  be  re- 
duced to  secondary  aluminum  pig,  but  your  alloy  steels  for  the 
specialized  purposes  won't  necessarily  fit  your  peacetime  work  and 
anything  which  has  already  taken  shape,  and  most  of  it  has,  is 
nothing  but  scrap. 

Senator  Ball.  How  did  they  handle  that  in  the  last  war? 

Mr.  Keller.  They  pretty  much  scrapped  it.  That  was  one  of  the 
biggest  problems  of  the  last  war.  We  had,  as  you  know,  a  telegram, 
"Suspend  work,"  and  then  a  telegram  to  go  ahead,  and  10  days  later 
a  cancelation.  That  stopped  everything  right  where  it  was  in  its 
track.     I  remember  very  distinctly  we  said  if  we  had  completed 


INVESTIGATION"    OF    THE    NATIONAL    DEFENSE    PROGRAM     8607 

the  operations  on  the  piece  to  the  final  determination  of  the  piece, 
instead  of  stopping  in  the  middle  of  the  machining  of  the  piece  and 
paid  for  the  extra  machining  ourselves  it  would  have  settled  the 
claim  very  materially.  We  had  many  arguments  whether  the  piece 
was  completed  up  to  operation  34  or  operation  23.  That  made  so 
much  bookkeeping. 

Senator  Ball.  What  do  you  think  they  should  do  when  they  no 
longer  need  stuff ;  just  chop  it  off  that  way? 

Mr.  Keller.  Do  what  we  do  when  we  stop  on  automobiles — if 
we  have  any  surplus  we  take  the  first  count  on  it  and  melt  it  up  and 
get  rid  of  it. 

Senator  Ball.  But  on  an  automobile  you  go  ahead  and  produce 
to  use  up  most  of  your  material  in  process. 

Mr.  Keller.  Yes,  but  we  get  changes  in  design  just  the  same  as  they 
do  here,  and,  of  course,  in  the  automobile  there  is  the  service  require- 
ment, and  a  lot  of  this  stuff  will  have  very  little  service  requirement 
after  the  war. 

The  Chairman.  Do  you  have  anything  further  ? 
Mr.  Keller.  I  think  that  covers  about  everything  I  can  give  you. 
I'll  be  glad  to  answer  any  questions  to  the  best  of  my  ability,  if  you 
care  to  ask  me. 

The  Chairman.  Any  questions  ? 
Senator  Ferguson.  I  have  nothing  further. 

Mr.  Fulton.  Mr.  Keller,  I  notice  from  the  figures  you  gave,  you  are 
roughly  a  little  beyond  the  half-way  mark  on  the  contracts  you  have 
had  to  date.     Your  deliveries  are  a  little  over  half  the  contracts. 
Mr.  Keller.  That's  right. 

Mr.  Fulton.  How  far  would  the  other  half  carry  you  into  the  fu- 
ture, if  you  didn't  get  additional  large  commitments  ? 

Mr.  Keller.  In  varying  amounts.  I  have  the  figures  only  on  the 
contracts  on  which  we  are  operating.  We  have  a  lot  under  negotiation 
at  the  present  time.  That  figure  can  change  every  week.  We  get 
extensions  to  contracts. 

Mr.  Fulton.  I  wonder  how  much  of  a  backlog,  in  effect,  you  have 
now.     How  many  months  of  operation  ? 

Mr.  Keller.  Roughly,  we'll  run — some  contracts  will  run  out  in 
July,  some  in  December,  but  on  those  we  are  running  short,  we  are  now 
negotiating  for  extensions. 

Mr.  Fulton.  What  I  meant  was,  if  3tou  didn't  get  additional  new 
contracts.  Of  course,  some  might  require  a  long,  long  time  to  finish, 
but  the  bulk  of  your  contracts  would  be  done  in  a  period  of  months, 
and  I  wonder  if  you  can  give  us  any  idea  of  what  that  period,  in  months, 
would  be.  In  other  words,  how  much  of  a  backlog  do  you  have,  ex- 
pressed in  months,  as  a  rough  estimate? 

Mr.  Keller.  I  think,  for  instance,  on  tanks,  we  have  a  backlog  and 
schedule  running  us  through  to  August  or  September,  with  new  stuff 
coming  along;  trucks,  we  are  pretty  well  fixed  up  for  this  year;  and 
Bof  ors  guns,  we  have  been  asked  to  step  up  the  capacity  on  those ;  they 
want  to  give  us  more.  On  the  bombers,  of  course,  you  know  we  are 
closing  out  the  one  that  we  have  been  working  on  for  several  years 
and  taking  on  another  one.  Our  problem  there  isn't  how  far  it  runs 
into  the  future,  because  I  guess  it  will  go  pretty  far,  but  getting  the 
new  stuff  ready  and  keeping  the  people  employed  before  we  run  out  of 
the  old  ones. 


8608     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

Mr.  Fulton.  But  in  general,  though,  it  appears  by  reason  of  the 
fact  that  you  are  constantly  getting  new  contracts,  that  you  really 
can't  tell  how  many  months'  backlog  you  have. 

Mr.  Keller.  I  can't  tell.  Then  we  have  new  stuff  coming  in  that 
would  take  men  released  from  the  jobs  that  are  stopped.  For  in- 
stance, this  20-millimeter  projectile  and  the  .50-caliber  ball,  I  under- 
stand, are  passing  out  entirely,  but  we  have  other  things  we'll  put  in 
that  plant. 

Mr.  Fulton.  Since  you  have  so  many  contracts  for  so  many  dif- 
ferent items,  in  effect,  to  use,  say,  the  Plymouth  plant,  you  would  have 
all  the  contracts  completed  before  you  could  start  moving  ? 

Mr.  Keller.  Yes;  you  have  touched  on  the  real  problem.  Those 
things  all  hang  together,  and  an  automobile  plant  starts  at  one  end  and 
the  stuff  comes  out  the  other,  and  it's  very  closely  integrated.  So  if  we 
were  to  carry  on  the  marine  engines  in  the  Chrysler  plant,  we  cer- 
tainly couldn't  make  automobile  engines  there,  and  if  that  contract 
carried  over,  that  alone  would  stop  our  going  over  to  automobiles  in 
that  division. 

Senator  Ferguson.  In  other  words,  one  of  those  provisions  in  a  con- 
tract for  a  year  may  tie  up  the  whole  plant  for  a  year. 

Mr.  Keller.  We  didn't  want  to  take  any  of  those,  but  we  said  we 
can't  win  the  war  by  arguing,  and  that  will  be  taken  care  of  when  we 
get  to  the  end. 

Senator  Wallgren.  Are  you  making  an  airplane  engine  ? 

Mr.  Keller.  We  are  about  to  make  the  2,300-horsepower  Wright, 
18-cylinder,  in  Chicago. 

Senator  Wallgren.  Twenty-three  hundred  fifty  ? 

Mr.  Keller.  Yes,  sir. 

Mr.  Fulton.  But  since  you  deal  with  so  many  different  procurement 
agencies,  any  one  of  which  could,  as  to  any  one  of  your  plants,  tie 
it  up,  isn't  it  important  that  some  kind  of  study  be  made  by  them 
and  you  of  your  contract  situation  in  the  not  too  distant  future  for 
the  purpose  of  trying  to  arrive  at  some  idea  of  when  there  might  be  a 
termination  or  cut-off  there  ? 

Mr.  Keller.  If  the  Government  would  make  up  their  minds  now 
what  they  wanted  to  run  after  the  termination,  say,  of  the  war  with 
Germany,  we  could  make  plans  to  keep  that  running,  whether  it  meant 
moving  something  or  making  a  temporary  set-up  for  our  own  produc- 
tion, until  we  work  that  out.  That's  where  I  emphasize  the  impor- 
tance of  Government  specifying  now  what  the  things  are  that  they 
want  and  get  them  in  definite  enough  form  that  the  contractor  can 
understand  it. 

Mr.  Fulton.  And  that,  of  course,  in  your  case — and  I  am  not  blam- 
ing them  for  not  doing  it,  but 

Mr.  Keller  (interposing).  I  am  not  blaming  them,  either;  I  am 
emphasizing  the  importance  of  it. 

Mr.  Fulton.  And  that  it  isn't  done  at  the  present  time? 

Mr.  Keller.  That's  right. 

Mr.  Fulton.  In  addition,  without  trying  to  ask  any  question  about 
particular  Chrysler  expectations  of  the  future,  could  you  tell  us  some- 
thing about  the  time  lag  that  might  be  necessary,  even  if  these  ob- 
stacles were  overcome,  to  enable  you  to  make  shifts  in  your  plants  and 
get  your  tools  back  into  order,  your  dies  and  jigs  ready,  and  start 
to  make,  or  to  produce,  a  car? 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8609 

Mr.  Keller.  Of  course,  some  would  go  back  awfully  quickly,  and 
others  you  have  to  study  from  the  standpoint  of  the  longest  time  item 
on  the  job.  Take,  for  instance — I  think  bodies  would  be  one  of  the 
big  problems,  because  you  would  have  to  get  sheet  steel  to  make  them 
and  start  the  dies,  and  that's  one  of  the  longest  jobs  in  processing. 
But  if  you  have  got  the  plant  set  up — and  I  think  it  would  be  around 
7  to  8  months  before  you  would  be  in  full  swing — I  wouldn't  say  how 
long  it  would  be  before  you  would  be  making  some. 

Mr.  Fulton.  There  again,  like  the  situation  of  removing  tools  from 
from  the  factory,  in  a  sense  your  longest  item  would  have  to  be  pro- 
vided for  before  you  could  make  your  first  unit. 

Mr.  Keller.  That's  right.  We  would  run  into  the  same  thing  we 
did  on  changing  over  to  war  work,  and  that  was  getting  the  physical 
facilities  ready  to  put  the  people  to  work.  And  you  know  the  country 
got  very  impatient,  even  though  we  were  doing  a  very  marvelous  job. 
The  only  thing  they  seemed  to  understand  was  that  we  had  floor  space 
cleared  and  machinery  under  paper  tarpaulins  in  the  yard.  It  looked 
like  real  activity,  but  the  real  activity  is  getting  the  tools  and  fixtures 
set  up  and  getting  some  pieces  run  off  them  so  you  know  your  pro- 
duction is  mechanically  right  before  you  can  put  your  people  to  work. 
Here  is  one  of  the  things  that  may  seem  little  but  it  becomes  a  tre- 
mendous thing  when  you  talk  about  thousands  of  machine  tools,  and 
that  is  that  these  machines  are  a  good  bit  like  shoes.  They  wear 
themselves  into  the  operation.  You  wear  your  heels  differently  from 
the  way  I  wear  mine.  When  a  machine  is  working  on  a  certain 
range  of  work  the  slides  get  adjusted  to  that,  and  when  you  put  a  job 
on  that  takes  a  different  range,  you  have  to  rescrape  the  bed  and  fit 
the  slides  again. 

And  that  is  one  of  the  big  jobs  we  had  to  do  in  converting  our  ma- 
chinery to  war  work,  and  we'll  run  into  that  again  putting  it  back. 
Mr.  Fulton.  So  that  with  all  these  items,  if  you  are  to  have  in- 
dustry that  will  pick  up  quickly — say,  the  automobile  industry,  with 
which  you  are  familiar — you  have  to  have  some  attention  to  many  of 
those  problems  now;  not  attention  that  would  divert  from  the  war 
program,  but  attention  that  can  be  consistent  with  the  war  program. 
Mr.  Keller.  We  want  the  Government  to  tell  us  what  machinery 
we  can  buy  and  at  what  price,  what  stuff  they  want  us  to  keep,  after 
we  get  the  first  flash  that  the  war  is  over  in  Germany  or  totally,  and 
what  they  would  like  us  to  keep  on  making,  and  then  cut  us  free  so 
that  we  can  go  out  and  work  like  hell  to  get  the  thing  changed  around, 
because  we  are  more  anxious  to  do  it,  perhaps,  than  anybody  else. 

Mr.  Fulton.  One  other  problem.  In  the  last  war  General  Motors 
and  the  Ford  Co.,  I  know,  had  to  make  large  borrowings  in  order  to 
obtain  sufficient  working  capital,  and  I  suppose  in  this  one,  if  you  are 
held  up  on  your  payments,  your  working  capital  might  be  reduced. 
Would  you  have  the  ability  to  market  quickly  enough  so  that  you  could 
stand  to  pay  all  your  suppliers  for  all  the  materials,  or  would  some 
working  capital  arrangement  have  to  be  made? 

Mr.  Keller.  You  are  a  couple  of  days  early  with  that  question. 
We  have  successfully  negotiated  a  VT  loan  for*  $250,000,000.  It  was 
subscribed  to  the  extent  of  over  $400,000,000. 

Mr.  Fulton.  Your  company  will  have  working  capital? 


8610     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

Mr.  Keller.  Yes,  and  Mr.  Hutchinson,  chairman  of  our  finance 
committee,  has  been  forward-looking  on  the  financial  status  of  the 
company,  and  we  have  made  an  appraisal  as  to  what  perhaps  would 
be  held  up  and  argued  about  in  terminations.  Depending  on  condi- 
tions that  prevail  in  setting  up  this  physical  movement  and  settlement 
of  these  claims,  we'll  use  more  or  less  of  that  credit  as  we  need  it. 

Mr.  Fulton.  Even  though  you  have  been  able  to  provide  it,  would 
it  be  true  that  you  have  to  make  plans  to  look  ahead  or  to  have  avail- 
able more  working  capital  than  would  be  required  of  your  peacetime 
operations  before  the  war? 

Mr.  Keller.  I  think  we  wrote  you  a  letter  on  that,  about  what  it 
would  take. 

Mr.  Fulton.  I  thought  you  might  put  that  on  the  record,  unless 
you  desire  to  keep  it  private. 

Mr.  Keller.  Oh,  no,  it's  quite  all  right.  This  was  written  in  Oc- 
tober, and  at  that  time  we  figured  we  would  spend  about  $25,000,000 
getting  the  plants  physically  back  into  condition,  and  about  $15,000,- 
000  restoring  the  tooling  and  for  the  creation  of  new  tools,  dies,  and 
fixtures  for  the  advance  model  production.  In  other  words,  this 
would  be  our  first-year  requirement,  because  while  we  would  have  to 
go  back  with  substantially  the  basic  component  of  the  present  car, 
we  generally  spend  about  that  much  a  year  anyway,  for  new  models. 
We  figure  to  build  back  our  prestige  would  take  advertising — 
developing  our  dealer  organization,  advertising  and  sales  pro- 
motional activities,  to  the  extent  of  $12,000,000. 

Then,  in  this  transition  period,  when  you  are  not  working  up  to 
full  capacity  and  your  burden  doesn't  get  absorbed,  we  figured  we 
would  have  an  estimated  expense  running  around  $23,000,000.  And 
then,  of  course,  we  have  very  little  inventory,  and  to  build  our  inven- 
tory would  take  about  $40,000,000. 

So  we  figure  it  would  take  about  $115,000,000  of  capital  to  get  us 
back  into  the  automobile  industry  after  this  war. 

Mr.  Fulton.  The  point  I  was  particularly  trying  to  put  some  at- 
tention to  is  this :  That  even  for  a  company  which  was  established 
and  successful  and  had  relatively  a  good  working  capital  margin,, 
such  as  the  Chrysler  Corporation,  the  problems  incident  to  tiie  war 
and  to  returning  to  peace  production  require  such  a  company  to  make 
provision  for  increased  working  capital  over  what  they  had  used  be- 
fore. 

m  Mr.  Keller.  Yes,  we  did.  We  have  $100,000,000  credit  we  estab- 
lished several  years  ago.  It  is  an  unsecured  credit  and  has  no  relation 
to  the  VT  or  Government  guaranty  which  we  are  trying  to  maintain 
and  sustain  for  whatever  domestic,  or  our  own  legitimate  business  re- 
quirements may  come  up. 

Mr.  Fulton.  That  only  stresses  the  fact  that  companies  which 
might  be  newcomers  in  business,  if  they  have  any  desire  to  take  over 
the  tools  and  go  into  a  new  business,  would  have  quite  a  working 
capital  problem. 

Mr.  Keller.  I  suppose  they  would,  yes.  I  suppose  if  it  looked  like 
a  good  loan,  they  could  get  the  loan.  We  had  no  difficulty  getting 
the  loan. 

Senator  Walloren.  I  presume,  being  an  automobile  manufacturer, 
you  are  watching  the  manufacture  of  synthetic  tires.  What  do  you 
think  of  the  prospects? 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8611 

Mr.  Keller.  I  think  we  are  going  to  have  a  terrific  time  on  account 
of  tires,  when  you  consider  that  not  only  will  you  need  the  tires  for 
the  new  automobile  production,  but  I  think  every  car  that  is  on  the 
road  will  want  a  new  set  of  tires  as  quickly  as  they  can  get  them. 

Senator  Wallgren.  I  think  we  are  doing  everything  we  can  to 
develop  the  synthetic  tires. 

Mr.  Keller.  So  far  as  I  know,  you  are.  I  don't  know  much  about 
that,  but  I  understand  some  tire  manufacturers  are  going  back  into 
production  now.  Several  years  ago  I  had  experience  with  one  set  of 
synthetic  tires.  I  drove  them  downtown  one  day  when  it  was  snowing, 
and  I  had  a  hard  time  getting  back  to  take  them  off,  and  I  have  never 
had  them  on  since.  But  there  has  been  a  lot  of  progress  made  in  that 
art  since  then,  but  we  have  been  too  busy  to  try  them  out.  However, 
that  is  one  of  the  big  problems,  because  you  have  quite  a  number  of 
millions  of  cars  in  use,  and  everybody  will  want  a  set  of  tires  for  his 
car. 

Senator  Ball.  Mr.  Keller,  can  you  give  us  a  rough  idea  of  how 
much  Chrysler  Corporation,  of  its  own  money,  is  likely  to  have  tied  up 
in  inventory  and  obligations,  valid  obligations  it  will  have  to  pay  to 
its  suppliers  and  so  on,  when  your  contracts  are  canceled?     Would 

that  $500,000,000  figure 

Mr.  Keller.  Four  hundred  sixty-seven  million. 
Senator  Ball.  Would  that  be  roughly  it  ? 

Mr.  Keller.  Oh,  no.  I  think  that  would  about  cut  in  half.  I  think 
the  gross  claim  of  the  subcontractors  would  about  cut  that  in  half, 
sir,  right  off  the  bat,  because  the  controlled  materials  situation  keeps 
them  from  building  up  big  inventories. 

Senator  Ball.  But  you  would  have  two  or  three  hundred  million  of 
your  own  company's  capital  tied  up. 

Mr.  Keller.  Yes,  but  you  see,  half  of  our  contracts  in  force  are  fee 
contracts,  and  they  close  out  as  vouchers  carry  on,  so  that  we  assume 
that  those  will  work  right  out  in  an  orderly  procedure,  the  same  as 
though  we  were  making  the  stuff. 

Senator  Ball.  You  would  get  your  money  on  those  pretty  rapidly, 
Mr.  Keller.  We  think  so. 

Senator  Ball.  How  much  would  delay  in  Government  payment  on 
those  inventories,  materials  in  process,  injure  your  working-capital 
position  ? 

Mr.  Keller.  Well,  that  is  what  we  borrowed  the  $250,000,000  for. 
Senator  Ball.  You  are  not  taking  any  chances. 

Mr.  Keller.  We  figured  that  the  best,  appraisal  we  could  make  at 
that  time,  that  that  would  about  cover  us.  "Now,  it  may  take  a  little 
more  of  our  own  money  in  addition  to  that,  but  a  great  deal  of  that 
depends  on  what  procedure  you  follow  in  handling  this  termination. 
If  these  things  have  to  be  gathered  into  a  bundle  and  they  all  stay 
unsettled— all  phases  of  that  determination  stay  unsettled  until  every 
one  of  them  is  settled— you'll  tie  up  a  hell  of  a  lot  of  money,  but  if 
you  can  get  the  machinery  out  of  the  way,  and  if  you  can  pay  the  in- 
ventory as  it  is  taken  and  get  these  jigs* and  fixtures  out  of  the  way 
and  get  this  physical  problem  out  and  settle  that  paper  work  or  bend 
that  paper  work  so  that  a  determination  can  be  handled  in  detail  as 
the  detail  is  ready  to  be  handled,  you  will  cut  the  problem  of  termina- 
tion by  a  very,  very  large  percent,  And  then  if  you  have  any  ques- 
tions with  respect  to  the  proportion  of  the  profits  you  should  carry 


8612     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

over  and  things  of  that  nature,  you  are  dealing  with  a  much  smaller 
amount  of  money  than  if  you  hold  the  whole  thing  in  a  ball  until 
you  get  everything  settled,  and  at  the  same  time,  you  facilitate  phys- 
ical change. 

Senator  Ball.  Your  corporation  actually  is  in  a  pretty  fortunate 
position  financially  to  weather  that  period  between  the  time  when  the 
contracts  are  canceled  and  you  get  out  the  liquid  capital,  working 
capital,  you  have  invested  in  it. 

Mr.  Keller.  I  don't  know  that  we  are  fortunate,  because  I  don't 
know  what  the  other  fellow's  picture  is.  I  only  know  my  own,  and 
I  know  it  has  been  quite  a  problem  and  it  has  taken  a  lot  of  work 
and  thought  to  get  it  into  this  condition. 

Senator  Ball.  I  have  been  wondering  about  smaller  firms  that  have 
expanded  tremendously  and  borrowed  a  lot  of  capital  and  had  it  all 
tied  up  in  inventory.  A  long  delay  in  settlement  by  the  Government, 
it  would  seem  to  me,  would  make  it  impossible  for  them  to  convert. 

Mr.  Keller.  That  all  depends  on  what  they  have  to  convert  to.  If 
they  haven't  anything  to  convert  to,  that  would  be  an  awful  problem. 

The  Chairman.  Are  there  any  other  questions  ? 

Thank  you  very  much,  Mr.  Keller. 

The  committee  will  adjourn  to  Monday  at  10,  when  we'll  start  on 
the  Canol  hearing. 

(Whereupon,  at  12 :  42  p.  m.,  the  committee  adjourned  until  Monday, 
November  22,  1943,  at  10  a.  m.) 


INVESTIGATION  OF  NATIONAL  DEFENSE  PROGRAM 


WEDNESDAY,  NOVEMBER  24,   1943 

United  States  Senate, 
Special  Committee  Investigating 

the  National  Defense  Program, 

Washington,  D.  O. 

The  committee  met  at  10 :  15  a.  m.,  pursuant  to  adjournment  on  Tues- 
day, November  23, 1943,  in  room  335,  Senate  Office  Building,  Washing- 
ton, D.  C,  Senator  Harry  S.  Truman  presiding. 

Present:  Senators  Harry  S.  Truman,  chairman;  Homer  Ferguson 
Kalph  O.  Brewster,  James  M.  Mead,  Joseph  H.  Ball,  Tom  Connally. 

Present  also:  Hugh  A.  Fulton,  chief  counsel;  H.  J.  Robinson, 
investigator. 

The  Chairman.  The  committee  will  come  to  order.  This  is  a  very 
difficult  room  in  which  to  hear,  and  I  hope  you  will  be  as  patient  and 
as  quiet  as  you  possibly  can  while  the  hearing  is  going  on. 

Mr.  Wilson,  will  you  please  give  for  the  record  your  full  name  and 
connections  ? 

Mr.  Wilson.  Charles  E.  Wilson,  president  of  General  Motors 
Corporation. 

The  Chairman.  If  you  want  to  put  in  the  names  of  your  associates, 
it  will  be  perfectly  all  right,  too. 

Mr.  Wilson.  Mr.  O.  E.  Hunt,  executive  vice  president,  and  Mr. 
Henry  Hogan,  vice  president  and  assistant  counsel. 

The  Chairman.  Mr.  Fulton,  did  you  have  some  questions  you 
wanted  to  ask  ? 

Did  you  have  a  statement  you  wanted  to  make  to  the  committee,  Mr. 
Wilson? 

TESTIMONY  OF  CHARLES  E.  WILSON,  PRESIDENT,  GENERAL 
MOTORS  CORPORATION 

Mr.  Wilson.  I  do  not  have  any  prepared  statement. 

The  Chairman.  We,  of  course,  are  interested  in  what  program  Gen- 
eral Motors  is  pursuing  with  a  view  to  the  termination  of  hostilities 
in  this  war,  and  whether  at  this  time  you  are  making  surveys  for  that 
purpose,  for  the  return  to  civilian  production. 

Mr.  Wilson.  I  thought,  coming  down  here  at  the  request  of  your 
committee,  that  I  would  attempt  to  paint  a  picture  as  best  I  could  in 
a  short  time  of  the  present  situation  and  the  problem  as  we  see  it,  and 
then  I  can  answer  any  questions  that  any  of  your  committee  care  to 
ask  me,  to  the  best  of  my  ability,  and  perhaps  we  will  stir  each  other 
up  to  developing  some  points  that  are  of  mutual  interest. 

The  Chairman.  All  right ;  you  proceed  in  your  own  way. 

8613 


8614     INVESTIGATION   OF    THE    NATIONAL    DEFENSE    PROGRAM 
PRODUCTION   RECORD   OF   GENERAL   MOTORS    CORPORATION 

Mr.  Wilson.  When  our  country  started  its  defense  program  in  June 
1940  of  course  it  immediately  became  an  important  policy  matter  with 
the  corporation  as  to  what  we  should  do,  so  starting  in  June  1940  we 
adopted  some  specific  policies.  They  are  rather  short,  and  I  would  like 
to  tell  you  about  them,  because  a  similar  kind  of  policies — they  will  have 
to  be  different,  of  course — should  be  adopted  as  we  go  out  of  the  war. 

No.  1  was  active  cooperation  with  our  Government  in  planning  the 
production  of  war  products,  acceptance  of  trial  orders,  engineering 
cooperation,  and  mass  production  of  such  products  for  which  we  had 
or  could  get  necessary  production  equipment. 

2.  Endeavor  to  obtain  contracts  for  the  more  complicated  war  ma- 
terials in  the  production  of  which  the  corporation's  engineering  and 
manufacturing  experience  would  be  of  greatest  value  to  the  country. 

We  thought  we  should  take  the  tough  jobs  and  leave  the  simpler 
work  to  the  smaller  concerns. 

3.  Since  General  Motors'  capacity  for  the  manufacture  of  metal 
products  is  about  10  percent  of  the  country's  capacity,  we  should  en- 
deavor to  get  orders  and  plan  to  produce  at  least  the  same  per- 
centage of  the  country's  requirement  for  this  type  of  war  material. 
In  other  words,  we  thought,  appraising  the  thing  as  best  we  could,  that 
if  we  took  about  that  same  percentage  of  the  defense  program,  we 
would  protect  the  people  in  our  plants  and  our  own  operations,  we 
would  do  our  part  of  the  job,  and  we  wouldn't  be  accused  of  trying 
to  get  too  much  of  the  job  and  expand  on  a  war  basis. 

4.  We  would  try  to  obtain  orders  for  war  products  for  every  plant 
city  and  for  every  plant.  That  was  to  protect  the  people  in  those 
different  plants.  Allot  the  production  where  it  could  be  produced  with 
the  greatest  efficiency  and  the  least  new  floor  space  and  machinery. 

5.  Solicit  and  accept  contracts  of  any  type  proposed  by  Government 
agencies:  competitive  bids,  cost-plus-fixed-fee,  fixed  price  with  pro- 
visions for  renegotiation  after  cost  and  production  experience.  In 
other  words,  we  said  we  would  try  to  do  business  the  way  the  cus- 
tomers wanted  us  to. 

6.  We  would  subcontract  component  parts  for  all  war  materials 
to  dependable  and  competent  contractors  who  had  equipment  that 
could  be  used  to  produce  such  parts. 

7.  We  would  utilize  existing  buildings  and  equipment  to  the  limit. 
We  would  request  new  facilities  from  the  Government  only  when  ab- 
solutely necessary. 

After  Pearl  Harbor,  we  adopted  an  eighth  important  policy,  and 
that  was  that  any  machines  or  materials  General  Motors  had  that  could 
not  be  used  in  war  production  would  be  made  available  to  any  other 
manufacturer  who  could  use  them  in  war  production. 

I  am  bringing  out  these  points  because  they  explain  how  the  cor- 
poration's facilities  came  to  be  in  the  condition  they  are  in. 

Under  this  policy,  and  cooperating  with  the  different  Government 
agencies,  we  accepted  orders  and  contracts  that  now  total  some- 
thing in  excess  of  $10,000,000,000.  Something  over  50  percent  of  those 
contracts  have  now  been  completed.  The  production  of  war  material 
was  $406,000,000  in  1941,  $1,898,000,000  (I  am  just  giving  round 
figures)  in  1942,  and  with  2  months  forecast,  it  will  be  $3,620,000,000 
for  this  year. 


INVESTIGATION   OF    THE    NATIONAL   DEFENSE    PROGRAM     8615 

The  actual  production  for  October — the  figures  were  just  available 
this  morning;  I  had  to  telephone  back  to  get  them  because  it  takes 
about  that  long  to  get  the  facts — was  $355,000,000.  That  is  the  largest 
month's  production  we  have  had.  That  is  at  the  rate  of  approximately 
$12,500,000  a  day. 

Mr.  Fulton.  How  does  that  compare  with  your  peacetime  rate, 
Mr.  Wilson? 

Mr.  Wilson.  It  is  getting  close  to  twice  the  peacetime  rate.  That 
is  at  the  rate  now  of  in  excess  of  $4,000,000,000  a  year,  and  the  largest 
peacetime  business  was  slightly  in  excess  of  $2,000,000,000. 

Mr.  Fulton.  Has  there  been  a  similar  increase  in  employees  and 
floor  space,  or  has  the  production  increased  at  a  more  rapid  rate  ? 

Mr.  Wilson.  I  have  the  figures  here  for  the  people. 

Senator  Ferguson.  Could  you  give  us  your  peak  in  private,  civilian 
work  and  your  peak  now  ? 

Mr.  Wilson.  The  peak  in  employment  in  1941  was  291,808  people. 
Perhaps  40,000  of  those  were  already  on  the  war  work,  so  perhaps  you 
can  say  that  250,000  people  represented  General  Motors'  employment 
in  commercial  business. 

We  now  have  employed,  in  October — perhaps  the  figures  are  about 
30  days  old — 458,407  people,  going  back  to  the  middle  of  October. 

Senator  Ferguson.  Was  October  your  peak  month  in  employees? 

Mr.  Wilson.  Yes.  The  employment  is  still  increasing  slightly  week 
by  week,  or  month  by  month.  Once  in  a  while  we  have  a  month  when 
we  perhaps  lose  more  people  than  we  gain.  I  would  say  that  another 
10  percent  increase  would  be  the  limit.  I  can't  be  sure  that  it  will 
actually  work  out  that  way. 

The  Chairman.  It  is  somewhere  in  the  neighborhood  of  just  twice 
what  you  would  ordinarily  employ  in  your  civilian  employment. 

Mr.  Wilson.  That  is  correct.  Incidentally,  we  now  have  83,000  em- 
ployees in  the  services.  Our  point  of  view  on  that  has  been  that  the 
services  needed  engineers  and  mechanics,  the  same  as  we  did,  in  this 
mechanized  war,  and  we  have  asked  for  deferment  for  relatively  very 
few  people. 

The  Chairman.  What  will  be  your  policy  with  regard  to  those  men 
when  the  hostilities  cease  and  they  are  discharged  ? 

Mr.  Wilson.  Congress  has  a  law  about  maintaining  the  seniority  of 
the  men,  which  we  think  is  quite  proper  and  fair,  and  as  far  as  I  am 
concerned,  I  think  those  men  deserve  preferred  treatment  if  it  is 
possible  to  give  it  to  them.  We  are  working  out  a  plan  now  to 
take  back  any  of  the  men,  wounded  or  discharged,  who  can  be  rehabili- 
tated, and  we  are  attempting  to  work  them  now  back  into  the  organi- 
zation. 

Senator  Ferguson.  In  other  words,  the  law  is  now  effective  as  far 
as  you  are  concerned.    You  are  taking  those  back  that  come  back. 

Mr.  Wilson.  That  is  correct.  We  are  going  past  the  law  to  the  ex- 
tent that  we  can. 

Senator  Ferguson.  Do  you  have  any  opposition  from  the  unions  on 
this  question  of  seniority  if  you  go  beyond  the  law  ? 

Mr.  Wilson.  Not  at  this  time. 

Senator  Ferguson.  You  haven't  had  ? 

Mr.  Wilson.  Whether  we  will  have  later,  of  course,  nobody  knows. 
It  isn't  so  much  of  a  problem  now  because  there  is  plenty  of  work  for 
anyone  who  is  able  and  wants  to  work. 


8616     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

Senator  Brewster.  There  was  no  policy  of  any  reductions  in  the 
status  of  men  who  might  be  called  into  the  service,  as  developed  in 
some  companies  where  men  were  demoted  prior  to  entering  the  service 
so  that  if  they  came  back  after  their  period  of  service,  after  we  passed 
the  law,  they  would  have  to  enter  at  the  bottom  again  ? 

Mr.  Wilson.  I  can't  imagine  any  such  arrangement  myself. 
Senator  Brewster.  It  certainly  was  no  policy  of  your  company  in 
that  regard  ? 

Mr.  Wilson.  Certainly  not  in  our  company. 

Senator  Brewster.  Although  it  will  mean  some  displacement  if  we 
have  the  anticipated  contraction,  if  these  men  are  reinstated  as  the 
law  provides. 

Mr.  Wilson.  I  think  it  is  only  fair  that  the  men  who  have  been  in 
the  service  have  their  opportunity  when  they  get  back.  I  don't  think 
we  are  going  to  be  very  happy  if  they  are  the  ones  who  have  to  sell  the 
apples.  As  far  as  I  am  concerned,  I  don't  see  that  there  is  any  good 
reason  why  our  country  should  get  in  that  position,  but  at  least  the 
returned  servicemen  oughtn't  to  be  on  the  end. 

Senator  Brewster.  So  you  are  in  sympathy  with  the  purpose  of 
the  law  ? 

Mr.  Wilson.  Not  only  in  sympathy  with  it,  but  somewhat  ahead  of 
it,  if  you  want  to  put  it  that  way. 

Senator  Ferguson.  Do  you  have  the  peak  on  women  ? 
Mr.  Wilson.  Yes;  in  '41  we  had  23,675  women,  and  now  we  have 
113,367.     You  understand  these  figures  are  about  30  days  back. 
The  Chairman.  We  understand  that. 

Mr.  Fulton.  You  will  have  a  major  problem  then — if  you  go  back 
to  your  peak  pre-war  business,  you  would  in  effect  have  to  have  200,000 
less  employees  at  the  same  time  that  you  were  subject  to  taking  back 
eighty-odd  thousand  from  those  who  have  gone  into  service. 
Mr.  Wilson.  That  is  correct. 

Mr.  Fulton.  Which  would  make  a  tremendous  problem  for  the 
corporation  and  for  the  people  working  for  you. 
Mr.  Wilson.  I  am  quite  conscious  of  it. 

Senator  Ferguson.  And  the  fact  that  the  women  went  back  to  the 
home  wouldn't  solve  the  problem  because  you  only  have  a  total  of 
113,000. 

Mr.  Wilson.  That  is  correct. 

Senator  Brewster.  Do  you  think  the  women  are  going  back? 
Mr.  Wilson.  Some  of  them  are.     I  think  people  are  going  to  have 
about  the  same  social  instincts  after  the  war  they  had  before  the  war. 
Senator  Brewster.  Not  quite. 

Mr.  Wilson.  I  don't  think  human  nature  changes  too  rapidly.  I 
think  a  good  many  of  these  women  would  like  to  have  their  homes 
and  to  take  care  of  them. 

I  think  there  is  another  thing  involved.  A  good  many  men  who 
are  pretty  well  up  in  years  are  making  an  effort  from  a  patriotic 
motive  to  do  what  they  can  in  the  war  effort.  Quite  a  few  of  those, 
I  think,  will  be  ready  to  retire.  I  think  that  reasonably  we  can 
look  forward  to  some  industrial  expansion  of  our  country.  I  see  no 
reason  why  we  shouldn't  have  a  bigger  business,  a  higher  standard  of 
living,  than  we  have  ever  had  before  in  this  country.  I  happen  to 
belong  to  the  camp  that  believes  in  the  theory  of  plenty  rather  than 
scarcity,  and  I  am  in  favor  of  going  at  this  job  and  producing  goods 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8617 

and  distributing  them  on  a  grand  scale  that  will  make  more  for. 
everybody. 

Senator  Ferguson.  You  mentioned  the  elderly  men  and  women 
who  are  working  now.  Does  the  company  have  a  policy  on  this 
question  of  men  over  40  at  the  present  time  ? 

Mr.  Wilson.  I  haven't  heard  about  it  for  years,  Senator. 

Senator  Ferguson.  Have  you  discovered  that  they  can  produce? 
Has  this  emergency  taught  that? 

Mr.  Wilson.  I  think,  if  I  may  say  so,  the  most  important  thing  we 
have  found  is  their  attitude  toward  their  work. 

Senator  Ferguson.  That  has  more  to  do  with  it  than  the  age? 

Mr.  Wilson.  That  is  right. 

I  would  like  to  pay  a  little  compliment  to  the  women  in  our  plants. 
Their  attitude  has  been  marvelous.  They  have  come  into  the  plants, 
many  of  them  never  having^ worked  before,  and  they  have  tried  awfully 
hard  and  done  very  well. 

Senator  Brewster.  What  percentage  of  your  business  prior  to  the 
war  was  automobile  as  distinct  from  other  lines,  approximately  ? 

Mr.  Wilson.  I  do  not  have  the  exact  figures.  Perhaps  80  to  85 
percent  of  it  was  in  car  and  truck  business. 

POST- WAR   PETROLEUM    SUPPLIES 

Senator  Brewster.  Have  you  taken  into  account  the  possible  prob- 
lem we  will  have  in  petroleum  after  the  war  in  the  matter  of  your- 
production  of  cars? 

Mr.  Wilson.  Are  you  thinking  that  there  might  not  be  enough 
petroleum  ? 

Senator  Brewster.  We  are  so  told  by  all  the  authorities. 

Mr.  Wilson.  The  first  time  I  ever  heard  about  that  was  in  1911,. 
and  the  country  was  worried  then  about  running  out  of  petroleum. 
I  don't  worry  about  that  too  much.  As  time  goes  on,  we  know  how, 
perhaps  through  a  process  of  evolution,  to  make  our  products  more 
efficient. 

The  Chairman.  Isn't  there  a  possibility,  too,  of  making  this  automo- 
bile eat  hay  and  solve  the  agricultural  surplus  problem  as  well  as  the 
shortage  of  gasoline  ? 

Mr.  Wilson.  I  doubt  that. 

The  Chairman.  You  don't  think  there  is  a  possibility  of  producing 
an  alcohol  product  that  could  be  used  ? 

Mr.  Wilson.  If  we  couldn't  have  anything  else,  we  could  produce 
engines  that  would  run  on  alcohol,  but  it  is  much  easier  to  take  the 
sunshine  of  past  ages  and  pump  that  back  up  out  of  the  ground  than  it 
is  to  work  hard  now  and  produce  hay  and  try  to  make  alcohol. 

The  Chairman.  I  appreciate  that,  but  if  there  is  a  potential  short- 
age, I  think  we  will  find  a  way  to  meet  it. 

Mr.  Wilson.  There  are  vast  reserves  in  this  country  of  low-grade 
fuels  that  can  be  processed  into  higher-grade  fuels,  and  I  think  that 
as  the  necessity  develops,  we  will  find  ways  of  doing  that. 

Senator  Brewster.  We  have  the  testimony  of  our  Petroleum  Ad- 
ministrator for  War  that  we  cannot  "oil"  another  war,  and  if  you 

Mr.  Wilson  (interposing).  I  hope  we  don't  have  to  do  that  myself. 
Two  wars  in  my  generation  are  plenty. 

311932 — 44 — pt.  21 8 


8618     INVESTIGATION   OF    THE    NATIONAL    DEFENSE    PROGRAM 

Senator  Brewster.  We  all  share  that  hope,  but  we  certainly  are 
contemplating  a  tremendous  Navy  and  air  force  in  the  post-war  period 
on  the  assumption  that  we  shall  be  prepared,  and  yet  they  would  be 
unable  to  move  without  petroleum,  and  I  don't  know  whether  we  can 
dispose  of  it  quite  as  easily  as  you  do  when  you  say  it  is  a  matter  of 
no  concern.  The  consumption  of  petroleum  in  this  country  in  1911 
was  quite  different  from  the  consumption  in  1941,  from  both  civilian 
and  military  standpoints,  and  if  you  have  some  information  that 
guarantees  this  country  against  a  problem  in  the  next  20  years  in 
petroleum,  you  are  making  quite  a  contribution. 

Mr.  Wilson.  Well,  perhaps  you  are  looking  ahead  a  little  further 
than  I  am. 

Senator  Brewster.  Twenty  years  is  not  long.  Your  cars  will  last 
almost  that  now,  I  have  learned. 

Mr.  Wilson.  I  hope  not.  [Laughter.]  We  are  trying  to  make  them 
the  best  we  know  how. 

I  think  it  is  perfectly  proper  for  our  country  to  set  aside  petroleum 
reserves  against  possible  use  in  another  war.  I  don't  think  that  we 
should  overdo  the  matter  of  draining  our  resources,  but  I  think  that 
the  potential  resources  are  very  great,  when  you  come  down  to  the 
final  show-down. 

Senator  Brewster.  You  mean  that  on  proven  reserves  or  on  what 
you  hope  may  exist? 

Mr.  Wilson.  It  would  be  on  proven  reserves,  but  going  further 
down  the  scale  than  we  commercially  do  now.  What  we  are  doing 
now  in  the  ordinary  competitive  way  is  use  the  things  that  you  can 
get  at  with  the  least  human  labor,  and  at  the  lowest  price.  If  you 
are  forced  to,  you  can  still  distill  coal,  you  know,  and  make  hydro- 
carbon fluid  that  can  be  used. 

Senator  Brewster.  What  would  you  estimate  would  be  the  cost  of 
that? 

Mr.  Wilson.  That  isn't  my  particular  business  and  I  would  judge 
any  figures  anybody  had  now  would  be  wrong  20  years  from  now. 
I  am  pretty  sure  of  that. 

Senator  Brewster.  I  certainly  share  your  optimism,  but  as  far  as 
the  proven  reserves  are  concerned,  ours  will  last  about  15  years  at  the 
current  rate  of  consumption,  according  to  all  figures.  We  recognize 
the  possibilities  in  these  other  fields,  but  since  you  produce  the  item 
which  makes  the  greatest  demands  on  petroleum  I  think  we  have  to 
be  somewhat  more  realistic  than  simply  your  hopes. 

Mr.  Wilson.  Well,  of  course,  there  are  other  places  over  the  world 
where  perhaps  we  can  get  some  fuel. 

Senator  Brewster.  If  Great  Britain  and  Russia  will  let  us  have 
them,  there  is  quite  a  lot  of  petroleum  around  the  world. 

Mr.  Wilson.  Of  course  you  are  getting  me  into  the  realm  of  higher 
politics  and  I  would  rather  stick  with  my  knowledge  of  General 
Motors. 

Senator  Brewster.  I  appreciate  it,  except  as  you  are  concerned  with 
the  greatest  industry  using  petroleum,  and  I  think  you  probably  have 
got  to  make  your  own  contribution.  I  have  had  suggested  to  me  by 
one  of  the  governmental  authorities  this  morning  that  you  would 
produce  cars  using  less  gas,  lower-powered  cars ;  is  that  contemplated 
at  all? 


INVESTIGATION   OF    THE    NATIONAL   DEFENSE    PROGRAM     8619 

Mr.  Wilson.  Not  immediately,  but  that  is  a  possibility  against  the 
future,  long  before  the  20  years  would  be  up. 

Senator  Brewster.  That  is  something  you  at  any  rate  figure  as  a 
possibility  ? 

Mr.  Wilson.  That  is  correct. 

Senator  Brewster.  I  didn't  mean  to  get  you  too  much  off  the  motor 
track. 

Mr.  Wilson.  My  only  point  there  is  that  we  have  never  had  proven 
reserves  too  far  out  there ;  there  is  the  cost  of  finding  the  reserves,  the 
technical  development  of  refining  hydrocarbons  is  a  continuing  art, 
that  is,  an  improving  art,  We  discussed  it  after  the  last  war.  We 
were  worried  about  it  as  we  are  now.  We  talked  about  setting  aside 
certain  Government  lands  of  proven  reserves. 

Senator  Brewster.  We  did  that. 

Mr.  Wilson.  And  I  don't  see  any  reason  why  we  shouldn't  do  that 
again  if  that  is  what  the  country  wants.  I  think  we  have  all  got  to 
recognize  that  our  country  was  not  very  well  prepared  for  this  war, 
and  I  think  it  was  a  pretty  close  shave. 

Senator  Brewster.  That's  right.  If  we  keep  on  another  20  years 
at  the  present  rate  we  won't  be  prepared  at  all  for  the  next  one  be- 
cause we  can't  move  a  ship  or  a  plane  without  petroleum. 

Mr.  Wilson.  Well,  currently,  of  course,  we  could  cut  the  consump- 
tion as  we  have  done  this  time.  We  didn't  even  have  the  ships  and 
the  planes,  let  alone  worrying  about  how  you  would  run  them.  Along 
that  line,  making  a  point,  I  think  it  is  perhaps  sometimes  overlooked 
that  we  did  have  about  18  months  to  prepare  for  the  war  before  we 
actually  got  in  it.  I  stated  here  the  policies  we  adopted  in  June  1940. 
Well,  until  December  1941  was  roughly  18  months.  During  that  time 
we,  working  with  the  Government,  the  agencies,  planned  increasingly 
for  war  production  as  the  situation  looked  more  and  more  serious  to  the 
country  and  more  money  was  appropriated  by  Congress  for  defense, 
and  right  after  Pearl  Harbor,  of  course,  for  the  war. 

Now,  it  was  a  difficult  situation  because  in  a  way  our  people 
psychologically  were  not  prepared  for  war.  They  didn't  want  to  be- 
lieve that  our  country  was  going  to  become  involved  in  another  terrible 
world  war. 

The  Chairman.  If  they  had  been  in  the  position  that  Russia  was  in 
when  she  was  attacked,  the  war  would  have  been  over  for  us  before  we 
had  gotten  one  plant  ready. 

Mr.  Wilson.  I  sensed,  when  the  war  came,  that  the  people  of  the 
country  held  it  against  the  politicians  and  the  business  people  that  we 
were  not  in  a  better  position  and  that  we  could  not  produce  and  arm 
our  soldiers  and  sailors  more  quickly.  As  far  as  the  peace  is  con- 
cerned, while  the  people  were  not  all  reconciled  to  the  fact,  or  even  a 
majority  of  them,  that  we  were  going  to  have  the  war,  they  all  are 
looking  forward  and  recognize  that  some  day  the  war  is  going  to  be 
over  and  we  are  going  to  have  peace.  I  think  we  should  trust  the 
people  of  our  country  some  more  and  not  be  afraid  realistically  to  do 
something  about  the  post-war  problems.  I  don't  think  we  need  to  be 
too  afraid  that  the  people  will  think  the  war  is  over  just  because  some 
relatively  small  moves  are  made  in  anticipation  of  that  day.  I  think 
they  will  approve  of  it,  because  they  are  all  looking  forward  to  that 
day. 


8620     INVESTIGATION   OF    THE    NATIONAL   DEFENSE    PROGRAM 

Senator  Ferguson.  Mr.  Wilson,  you  believe  that  if  we  had  given 
the  people  the  facts  before  the  war  we  would  have  been  much  better 
off? 

Mr.  Wilson.  I  think  so.  I  am  not  too  afraid  myself  to  trust  the 
people  of  our  country. 

Senator  Ferguson.  And  if  we  will  give  them  the  facts  now  we  will 
be  much  better  off  1 

Mr.  Wilson.  I  am  not  like  the  ostrich,  sticking  my  head  in  the  sand 
and  saying  there  isn't  much  out  there  and  the  danger  won't  bother 
us.  I  am  pointing  out  that  we  had  18  months  going  in  and  we  should 
make  some  plans  going  out,  and  certainly  it  is  not  unreasonable  to 
think  now  of  the  war  being  over  in  18  months.  Personally,  I  don't 
think  it  is  going  to  be  over  as  quickly  as  many  people  hope.  Whether 
it  is  6  months  or  6  years,  it  wouldn't  be  unreasonable  to  have  a  small 
program  anticipated.  None  of  us  knows  how  it  is  going;  in  fact, JC 
think  the  surest  thing  is  that  it  is  not  going  to  wind  up  as  anybody 
thinks  it  will  now.  I  think  that  is  just  about  the  surest  thing  that  you 
can  put  down. 

PROBLEMS  OF  CONVERSION  FROM  WAR  PRODUCTION 

Senator  Brewster.  And  it  is  incumbent  upon  both  Government 
agencies  and  businessmen  at  least  to  have  a  plan  ready  to  function  or 
plans  ready,  let  us  say. 

Mr.  Wilson.  I  think  it  is  not  only  the  plan,  but  I  think  certain  con- 
trols, and  so  forth,  have  got  to  be  gradually  taken  away,  unshackling 
business  so  it  can  start  to  make  the  moves,  you  see.  I  am  talking  about 
the  reconversion  of  post-war  business.  I  am  bothered  by  three  things : 
No.  1,  I  am  afraid  that  the  time  factor  involved  is  not  understood. 
Business  is  not  like  turning  on  and  off  a  faucet.  It  is  so  much  easier  to 
stop  an  activity  than  it  is  to  create  a  new  one  to  take  its  place. 

Senator  Brewster.  It  still  takes  9  months. 

Mr.  Wilson.  Some  things  even  take  longer.  So  I  am  afraid,  that 
factor  isn't  understood.  Some  time  we  will  suddenly  find  that  we 
have  some  surplus  manpower  or  some  surplus  material  and  available 
manpower,  and  we  will  say,  "Well,  you  can  make  some  more  auto- 
mobiles or  refrigerators  or  something,"  and  then  everybody  is  going 
to  be  surprised  to  find  that  we  can't  promptly  use  that  material  and 
employ  the  people,  and  they  will  be  rather  discouraged  by  the  time 
factor. 

The  Chairman.  I  remember  very  distinctly  what  a  time  we  had  in 
conversion  from  peacetime  manufacture  into  wartime  manufacture, 
and  it  is  my  opinion  that  the  reconversion  is  going  to  be  much  harder 
and  much  more  difficult. 

Mr.  Wilson.  Senator,  the  point  I  am  trying  to  make  is  that  what 
looked  like  a  very  tough  job  took  too  long.  If  we  had  had  Pearl 
Harbor  before  we  started,  then  you  would  have  been  disappointed 
with  what  happened. 

The  Chairman.  That  is  right. 

Mr.  Wilson.  The  first  10  percent  of  any  production  you  make  is  the 
most  important,  and  10  times  10,  of  course,  is  a  hundred,  but  10  times 
nothing  is  still  nothing.  If  you  have  nothing  to  start  with  at  a  par- 
ticular time,  when  you  turn  on  the  steam  you  can't  multiply  it  rapidly. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8621 

It  is  that  process  of  getting  all  the  initial  things  and  troubles  elimi- 
nated. If  you  know  what  you  can  do,  if  you  have  all  the  materials  and 
sources,  the  quality  established,  then  you  can  multiply  that  on  up  from 
there,  but  it  is  that  initial  stage  where  the  time  factor  enters  into  it 
that  I  am  afraid  is  not  going  to  be  understood,  and  I  think  it  is  time  in 
relation  to  the  war  cycle  that  we  took  the  people  of  our  country  into 
our  confidence  and  told  them  frankly  that  there  is  still  a  tough  job  to 
be  done  on  the  war,  but  realistically  we  should  be  prepared  for  the 
beginnings  of  peace. 

Senator  Brewster.  Is  there  anything  comparable  to  pilot  plants 
that  can  shorten  that  time  lag? 

Mr.  Wilson.  Well,  that  would  only  apply  on  new  products.  If  you 
wanted  to  do  something  new,  then  if  you  could  make  a  few  of  the  new 
products  now  and  prove  your  designs  that  would  be  exceedingly  help- 
ful, but  in  our  case  it  is  not  only  the  new  things  that  we  might  like  to 
make  that  we  can't  get  material  for,  but  our  production  facilities  for 
our  old  products  have  been  completely  disorganized.  In  many  cases 
even  the  steels  that  we  used  3  years  ago  are  not  the  ones  that  are  cur- 
rently being  produced.  We  are  using  now  about  75,000  tons  of  steel  a 
month  in  the  war  effort.  As  a  matter  of  interest,  in  the  peace  pro- 
duction of  1940-41,  we  were  using  around  250,000  tons  of  steel  a  month. 
I  think  that  the  steel  shortage  is  about  over,  or  perhaps  is  over, 
and  we  don't  quite  recognize  it  yet.  I  have  two  or  three  reasons  for 
thinking  that.  The  construction  job  is  about  finished  in  connection 
with  the  war,  as  is  the  consumption  of  material  for  machine  tools, 
and  the  inventories  are  built  up.  The  commercial  inventories  at  the 
beginning  of  the  war  could  not  be  used.  They  ran  into  billions  of 
dollars.  You  have  to  have  a  working-process  inventory;  you  have 
to  have  some  raw  stock,  because  the  production  flow  of  material  is  not 
a  perfect  thing,  and  if  you  don't  have  some  bank  of  material  you  can't 
have  continuity  of  work  in  your  plant.  You  have  to  have  some  safety 
factor. 

In  addition  to  the  material  that  went  into  the  finished  product 
that  came  out  of  the  plant,  a  tremendous  amount  of  material  was 
going  into  the  preparation  of  facilities  and  the  building  up  of  inven- 
tories, not  only  to  a  peacetime  level  but  with  the  increased  activity 
of  the  country  the  inventories  had  to  be  higher  than  they  ever  were 
in  peace.  I  don't  know  exactly  what  the  figures  are,  perhaps  $5,000,- 
000,000  higher.  That  is  about  over  because  this  thing  is  getting 
stabilized,  and  perhaps  from  now  on  about  as  much  ought  to  come 
out  at  the  finished  end  as  goes  in  at  the  bottom. 

The  steel  industry  is  running  very  close  to  a  hundred  percent,  and 
in  normal  times  on  the  average  perhaps  it  runs  at  60  percent  of 
capacity. 

Mr.  Fulton.  On  steel,  for  example,  you  use  a  great  deal  of  the  prod- 
uct of  the  strip  mills  which  have  been  transferred  over  to  plate  pro- 
duction. They  would  have  to  be  transferred  back,  I  suppose,  before 
you  could  even  get  your  strip  again. 

Mr.  Wilson.  Of  course,  some  of  them  have;  some  of  them  couldn't 
be  converted. 

Senator  Mead.  Mr.  Wilson,  before  you  leave  that  subject,  isn't  there 
another  approach  to  the  problem  that  we  might  dwell  on  briefly,  and 
that  is  while  it  will  take  considerable  time  to  effect  a  conversion  from 


8622     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

our  war  production  to  the  necessary  peacetime  production,  such  a& 
production  of  automobiles,  trucks,  radios,  refrigerators,  and  so  on, 
isn't  there  a  possibility  of  taking  up  that  lag  by  establishing  a  reservoir 
of  very  necessary  work  that  should  be  done  immediately  after  the  war 
terminates?  For  instance,  our  towns,  cities,  counties,  States,  and  so 
on — and  this  applies  also  to  some  of  our  manufacturers — have  been 
prevented  from  doing  a  very  necessary  job  of  road  building  and  road 
repairing  and  repairs  and  extension  of  county  and  State  facilities, 
schools.  Various  other  items  of  that  kind  have  been  neglected  because 
of  shortage  of  supplies  of  materials.  I  was  wondering  if  your  agency 
or  some  similar  agency  was  inventorying  that  great  reservoir  of  work, 
setting  it  up  for  a  time  when  it  could  be  started  without  the  reconver- 
sion lag  that  will  be  required  in  changing,  say;,  the  General  Motors 
from  its  wartime  productivity  to  normal  peacetime  production. 

Mr.  Wilson.  Well,  Senator,  I  think  you  will  find  when  you  get 
into  any  one  of  those  particular  things  the  same  time  factor  becomes 
involved.  You  know,  no  physical  activity  goes  on  any  more  in 
this  complicated  age  we  are  living  in,  no  piece  of  inanimate  metal,, 
concrete,  or  anything  else  moves  from  one  place  to  another  without 
a  piece  of  paper  to  direct  it.  It  has  to  be  named  and  a  piece  of  paper 
has  to  tell  it  where  to  go,  so  to  speak,  or  tell  somebody  where  to  take 
it,  what  to  do  with  it.  All  these  things  you  are  talking  about  are- 
going  to  have  to  be  planned  and  the  paper  work  followed  up  and  the 
same  relative  thing  will  be  involved. 

Senator  Mead.  I  was  wondering  if  the  planning  was  now  beings 
done,  if  a  system  was  set  up  whereby  priorities  would  be  granted  to 
the  State,  the  county,  the  city,  the  town,  that  had  its  plans  all  perfected,, 
and  was  ready  to  go  ahead. 

Mr.  Wilson.  You  will  find  this,  too ;  as  far  as  people  are  concerned, 
you  can't  move  them  around  exactly  like  material.  You  talk  about 
manpower  as  though  it  was  so  many  bushels  of  wheat,  and  so  on.  They 
aren't  that  kind  of  people. 

Senator  Mead.  But  in  that  particular  field  there  is  now  a  develop- 
ing unemployment.  One  might  assume  that  we  are  right  up  against 
a  large  manpower  problem,  but  as  we  terminate  the  necessary  expan- 
sion of  wartime  facilities,  housing,  and  so  forth,  we  set  up  a  reservoir 
of  building-trades  mechanics,  of  road  builders,  and  others  in  that 
category  who  are  no  longer  all  necessary  in  the  war  effort.  Strange  as 
it  may  seem,  some  of  our  cities  are  already  developing  unemployment 
problems,  so  I  can  see  where  we  need  the  material,  but  the  presence 
of  the  plans  and  the  availability  of  the  workers  will  reduce,  I  think, 
the  over-all  problem. 

Mr.  Wilson.  Perhaps  I  can  state  it  another  way.  I  think  all  of 
these  things  should  be  done.  I  think  they  should  be  done  by  the  people 
who  are  really  going  to  take  the  responsibility  for  them.  There  are 
certain  kinds  of  things  that  should  be  done  by  the  Federal  Government 
as  they  have  done  in  the  past,  and  they  should  have  their  plans  and 
be  ready  to  put  them  into  this  reconversion  problem.  The  States  and 
cities  should  also  have  their  plans,  perhaps  more  hospitals  should  be 
built,  and  all  kinds  of  things. 

Senator  Mead.  We  are  not  talking  about  a  W.  P.  A.  project  now; 
we  are  talking  about  very  vital  necessities  and  postponed  work. 

Mr.  Wilson.  I  think  as  far  as  the  people  are  concerned,  one  of  the 
first  things  they  are  going  to  want  is  some  new  automobiles  and  house- 


INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM     8623 

hold  appliances  and  things  that  are  more  directly  affecting  their  lives. 
Automobiles  also  give  the  whole  population  a  greater  flexibility. 
These  people  who  are  going  to  have  to  change  employment,  work  on 
construction  jobs,  and  things  like  that,  are  going  to  want  to  have  auto- 
mobiles to  get  them  to  these  jobs.  So  we  are  trying  at  General  Motors 
to  do  our  part  in  our  business.  I  think  the  idea  of  having  some  good 
cheap  houses  prefabricated  or  something  like  that  is  a  nice  idea.  It 
isn't  what  we  think  is  our  particular  business.  We  think  there  are  a 
number  of  other  concerns  or  people  who  do  not  have  as  clearly  defined 
and  as  definite  a  conversion  job  as  we  have  who  can  work  on  that 
one  thing. 

Senator  Mead.  Of  course,  you  would  be  interested  in  highways  and 
bridges  and  streets,  a  proper  balance  in  our  petroleum  industry;  of 
course  you  would  also  be  interested  in  the  general  economic  prosperity 
of  the  customers  of  General  Motors. 

Mr.  Wilson.  Well,  we  have  a  very  simple  point  of  view  in  General 
Motors.  We  think  that  what  is  good  for  our  country  is  good  for  us. 
We  don't  have  any  separate  kind  of  position.  We  think  we  are  so 
big,  and  the  products  we  make  are  so  vitally  associated  with  the  welfare 
of  the  citizens,  that  we  say  what's  good  for  the  country  we  go  along 
with  and  that  is  good  for  us. 

Senator  Mead.  By  advocating  that  you  help  prepare  the  country 
for  the  proper  approval  of  a  sensible  plan  of  changing  it  from  a 
military  to  a  peacetime  economy. 

A  while  ago  you  said,  and  this  bears  out  the  point  you  are  now 
making,  that  we  weren't  prepared  for  war.  We  tried  to  avoid  the 
war.  Well,  in  that  connection,  we  had  almost  as  many  men  in  Con- 
gress telling  the  people  how  easy  it  was  for  us  to  avoid  the  war  as  we 
had  telling  the  people  how  vitally  necessary  it  was  for  us  to  prepare 
for  war,  and  that  is  noted  in  some  of  the  votes.  This  is  only  hindsight 
on  my  part.  In  some  of  the  very  vital  matters  in  preparing  the  country 
for  war  we  only  secured  the  approval  of  some  of  those  matters  by  one 
or  two  or  three  votes,  so  it  is  good  for  the  country  to  have  an  organiza- 
tion as  widespead  as  yours  assisting  the  country  in  the  proper  transi- 
tion from  a  wartime  into  a  peacetime  economy,  because,  as  you  say, 
what  is  good  for  the  country  is  good  for  your  company. 

Mr.  Wilson.  That  is  correct,  and  that  is  why  I  am  talking  to  you 
men  here  this  morning  frankly,  saying  that  I  think  it  is  timely  for 
us  to  do  something  about  it  with  relation  to  the  time  factor,  and 
trusting  the  country  not  to  think  that  we  are  foolish,  that  General 
Motors  is  thinking  only  of  its  peacetime  business,  because  that  is 
not  so. 

Senator  Mead.  I  still  say  there  are  two  types  of  work.  For  instance, 
it  is  going  to  take  General  Motors  a  long  time  to  move  out  the  very 
large,  heavy,  powerful  machines  that  they  now  have  to  make,  we  will 
say  big  tanks,  and  to  supplant  them  with  more  fragile  machinery  that 
will  be  able  to  make  the  smallest  type  of  automobile.  It  is  going  to 
take  a  long  time  to  make  that  conversion  job.  But  we  have  a  million 
and  a  half  men  working  on  the  railroad,  and  the  railroad  tonnage  is 
abnormal  now  and  it  will  drop  perceptibly  when  the  war  is  over;  it 
isn't  necessary  for  us  to  dismiss  all  those  railroad  men,  because  we  have 
to  rehabilitate  the  whole  system,  and  a  great  many  of  those  men  can 
be  employed  even  without  new  equipment  and  material  to  do  a  repair 


8624     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

job  and  improve  the  roadways  and  prepare  for  the  peacetime  position 
the  railroads  will  have  to  take  in  our  economy. 

That  goes  for  almost  every  industry  in  the  country.  They  can  em- 
ploy great  numbers  of  men,  provide  employment  for  them,  and  get 
these  jobs  started  and  will  not  have  to  await  the  physical  factors  in- 
volved in  complete  plant  conversion.  In  some  plants  I  imagine  that 
it  would  be  easier,  it  would  be  shorter,  at  least,  as  far  as  time  is  con- 
cerned, to  build  a  new  plant  than  it  would  be  to  take  out  all  the  very 
heavy  machinery,  replace  it  with  lighter  machinery  that  will  be  neces- 
sary to  do  the  peacetime  job. 

Mr.  Wilson.  Senator,  you  would  be  surprised  what  we  could  do 
if  no  one  puts  stumbling  blocks  in  our  way.  That  is  where  the  trouble 
comes.  It  is  not  that  we  can't  move  the  heavy  machinery  and  move 
it  pretty  quickly,  but  if  the  machinery  belongs  to  somebody  else  and 
they  say,  "You  can't  move  it,"  that  is  where  the  trouble  comes. 

The  Chairman.  How  many  Government-owned  machines  as  com- 
pared to  the  ones  you  own  are  in  your  shops  today  ? 

Mr.  Wilson.  I  have  some  figures  here.  That  really  makes  my  sec- 
ond point.  My  first  point  was  this  time  factor.  My  second  point  is 
the  physical  plant  involved. 

The  Chairman.  We  are  interested  in  that  very  much. 

Senator  Mead.  Before  you  leave  this,  Mr.  Wilson,  I  saw  a  great 
many  of  our  automobile  plants  in  which  they  owned  all  the  machine 
tools,  trying  to  convert  from  peacetime  to  wartime  production.  I  want 
to  say  that  it  took  a  long,  long  time.  There  were  a  great  many  people 
who  were  impatient  because  of  the  time  factor,  and  no  Government- 
owned  machinery  or  other  red-tape  requirements  were  in  their  way. 
That  was  because  they  never  did  it  before ;  it  was  a  brand-new  job  and 
they  didn't  feel  they  ought  to  do  it. 

Senator  Connallt.  Senator  Mead,  will  you  yield  to  one  question? 
How  do  you  do,  Mr.  Wilson.  I  want  to  say  I  think  the  automobile 
industry,  of  which  yours  is  the  biggest,  I  suppose,  performed  a  mar- 
velous transformation  from  peace  to  war  and  rendered  a  great  na- 
tional service.  May  I  ask  you  this  one  question?  Suppose  the  war 
would  stop  next  week,  how  long  would  it  take  you  to  begin  turning 
out  automobiles  ?  How  long  would  it  take  you  to  turn  out  your  first 
car  ?     That  is  a  guess,  of  course. 

Mr.  Wilson.  That  is  a  simple  question.  I  wish  I  could  give  you 
a  simple  answer  to  that,  but  I  can't.  In  the  first  place,  I  don't  know 
what  the  rules  and  regulations  are  going  to  be  under  which  we  will 
have  to  operate. 

Senator  Connallt.  When  the  war  is  over  we  will  relax  most  of  these 
regulations. 

Mr.  Wilson.  If  you  will  set  down  the  conditions  that  will  occur, 
then  I  can  give  you  a  pretty  fair  answer. 

Senator  Connallt.  Suppose  we  take  the  bridle  off. 

Mr.  Wilson.  We  can  do  anything  we  please  and  move  the  Govern- 
ment machinery  out  in  the  snow  as  we  did  our  own  and  not  get  into 
any  trouble  about  it,  and  all  that  kind  of  thing? 

The  Chairman.  Without  waste  of  time. 

Mr.  Wilson.  And  not  have  to  waste  time  while  a  bunch  of  auditors 
paw  over  $500,000,000  worth  of  inventories? 

Senator  Connallt.  For  the  purpose  of  this  examination  we  will 
make  some  hypothetical  cases.     Yes,  turn  you  loose. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8625 

Mr.  Wilson.  Well,  if  you  turned  us  loose,  we  could  be  producing 
some  cars  in  3  months,  and  a  pretty  fair  production  in  6  months. 

Senator  Connallt.  That  is  what  I  am  getting  at. 

Mr.  Wilson.  That  means,  of  course,  that  we  would  go  out  and 
buy  the  things  that  we  had  to  buy  and  pay  for  them  what  it  took  to 
get  them. 

Senator  Connally.  That  is  right. 

Mr.  Wilson.  I  don't  think  it  is  going  to  be  that  kind  of  wind-up. 

Senator  Connally.  Personally,  you  wouldn't  do  that?  You 
wouldn't  go  out  and  just  buy  them  regardless? 

Mr.  Wilson.  People  did  that  after  the  last  war. 

Senator  Connally.  I  know,  that  wasn't  you;  I  am  talking  about 
you  now. 

Senator  Mead.  Are  you  finished,  Senator  Connally  ? 

Senator  Connally.  Yes. 

Senator  Mead.  Before  we  leave  the  subject  I  want  to  ask  the  counsel 
for  our  committee  if  we  didn't  have  considerable  difficulty  in  forcing- 
certain  industries  to  convert  and  certain  other  industries  to  convert 
from  50  percent  to  100  percent.  Wasn't  there  a  reluctance  to  full  con- 
version that  our  committee  took  up  ? 

Mr.  Fulton.  There  was  a  reluctance,  but  of  course  it  was  a  re- 
luctance in  view  of  the  situation.  They  had  to  have  Government 
orders  for  all  that  they  could  produce,  and  in  effect  an  understanding 
that  that  is  what  the  public  wanted.  I  mean  industry  naturally  had 
to  await  the  time  when  the  Government  said  it  needed  the  plants. 

Mr.  Wilson.  Senator,  I  think 

Senator  Mead  (interposing).  Pardon  me,  wasn't  there  an  objection 
on  the  part  of  the  local  governments,  sometimes  on  the  part  of  the 
people,  that  conversion  might  have  dire  effects  upon  their  local 
economy  ? 

Mr.  Fulton.  There  was,  and  there  was  contention  that  tools  and  all 
were  suitable  for  war  production  use,  which  apparently  was  the  case 
with  Mr.  Keller,  who  said  the  Chrysler  Co.  used  some  85  or  90  percent 
of  its  tools ;  but  of  course  that  is  one  of  the  points ;  you  have  to  know 
a  great  many  things  before  you  can  make  these  determinations. 

Mr.  Wilson.  I  can  answer  your  question.  There  was  some  criticism 
of  companies  on  the  basis  that  they  were  refusing  to  convert.  Mostly 
that  was  by  people  who  didn't  understand  the  problems;  they  didn't 
understand  what  was  involved.  That  is  why  I  read  to  you  gen- 
tlemen the  policies  that  we  adopted  in  June  1940.  We  went  at  the 
job,  what  we  thought  was  our  share  of  the  job ;  we  took  what  we  could 
get  in  doing  the  job;  we  used  what  we  had  in  our  plants.  I  would] 
like  to  point  this  out,  that  if  we  had  only  $1,000,000,000  worth  of 
orders  in  General  Motors  we  couldn't  use  anything  like  the  amount 
of  the  machinery  that  we  did  when  we  got  $10,000,000,000  worth  of 
orders,  because  of  the  variety- of  things  and  the  fact  that  as  we  pieced 
out  your  production  facilities  by  buying  the  new  special  machines 
required,  then  we  could  use  more  and  more  of  our  old  machines, 
all  our  drill  presses  and  stamping  machines.  Perhaps  when  we 
started  we  could  use  15  percent  of  our  equipment.  Some  of  that  15 
percent  we  had  plenty  more  just  like.  When  the  Government  asked 
us  to  double  our  capacity  we  could  use  another  15  percent.  Am  I  clear 
in  that  matter  ? 


8626     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

The  Chairman.  Yes. 

Mr.  Wilson.  So  that  on  our  initial  orders  we  couldn't  use  a  lot  of 
our  facilities,  but  as  we  made  more  and  more  kinds  of  things  (and 
v^e  were  always  striving  to  get  the  orders  for  the  things  that  we  had 
equipment  for  under  our  policy)  we  were  able  to  use  more  and  more 
of  them.    I  have  the  figures  here  if  they  are  interesting  to  you. 

At  the  beginning  of  the  defense  program  in  1940,  the  corporation 
had  about  75,000  machine  tools.  Since  that  time  we  have  ordered  for 
the  Government  in  round  figures  61,000.  That  is  what  we  actually 
had  on  November  1. 

Senator  Mead.  I  am  not  finding  fault  with  General  Motors.  I  think 
you  have  done  a  very  good  job.  I  think  the  trouble  lies  in  the  fact 
that  the  country  was  reluctant,  as  you  pointed  out,  to  realize  the 
enormity  of  the  task  ahead,  and  we  just  had  to  parade  .along  slowly 
rather  than  to  rush  into  it.  I  remember  the  criticism  of  the  President's 
transfer  of  the  over- age  destroyers.  I  remember  the  criticism  when 
lie  sent  the  Springfield  rifles  to  England  after  Dunkirk,  and  yet  when 
you  look  back  at  it  now,  if  he  didn't  do  those  things  we  probably  would 
be  in  terrible  shape  today ;  but  he  was  traveling,  industry  was  travel- 
ing, just  about  as  fast  as  public  opinion  would  permit.  So  I  think  you 
did  a  very  good  job. 

Mr.  Wilson.  He  had  to  do  a  little  horse  trading,  like  the  over-age 
destroyers  for  the  bases  and  things  of  that  kind.  That  was  a  little 
expediency  because  we  were  in  a  sort  of  jam. 

Senator  Mead.  But  to  indicate  the  attitude  of  mind,  we  just  have  to 
refer  back  to  the  debates  that  favored  and  opposed  deals  or  programs 
of  that  kind.  The  country  wasn't  united.  That  is  what  I  wanted  to 
bring  out.  The  country  wasn't  united  until  Pearl  Harbor,  but  the 
country  is  united  now,  not  only  so  far  as  the  prosecution  of  the  war  is 
concerned,  but  the  big  job  of  conversion.  That  has  no  complexities 
like  the  complexity  that  troubled  the  people  when  it  came  to  going 
into  the  war. 

Mr.  Wilson.  As  I  said,  we  had  about  75,000  machine  tools  in  General 
Motors.     We  now  have  under  our  control  143,774  as  of  November  8. 

The  Chairman.  How  many  of  those  tools  does  the  Government  own  ? 

Mr.  Wilson.  I  will  give  you  the  figures :  85,838  belong  to  General 
Motors.  We  bought  some  more  in  that  time.  56,708  of  them  belong 
to  the  Government. 

The  Chairman.  Are  they  intermingled  with  your  tools? 

Mr.  Whson.  They  are  mixed  all  up  in  the  105  plants ;  74  of  them 
belong  to  the  British  Purchasing  Commission  and  1,154  belong  to  other 
people  where  we  are  the  subcontractors  and  they  supplied  us  with 
special  machinery.  So  that  is  the  total  that  we  have  in  our  services 
now. 

Of  the  tools  that  belong  to  General  Motors,  that  is,  the  85,838—61,524 
are  on  war  work,  206  are  reserved  for  war  work — new  projects,  but  we 
are  about  through  with  that,  you  see.  That  206  is  pretty  small  com- 
pared with  the  total.  6,844  are  on  authorized  service  parts  and  similar 
kinds  of  civilian  production,  like  building  some  locomotives  now,  for 
instance;  17,264  are  surplus  that  we  have  not  been  able  to  use  in  the 
war  effort. 

The  Chairman.  Those  were  tools  of  your  own  that  you  had  to  set 
aside? 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8627 

Mr.  Wilson.  Yes. 

The  Chairman.  Have  you  got  them  stored  in  your  own  places? 

Mr.  Wilson.  Some  of  them  are  out  in  the  weather,  covered  with 
tarpaulins  and  set  aside  any  place  we  could  put  them. 

The  Chairman.  Can  you  use  them  again  if  you  go  back  to  making 
cars  ? 

Mr.  Wilson.  Most  of  them.  Otherwise  we  would  have  scrapped 
them  for  the  metal.  In  line  with  our  policy  after  Pearl  Harbor,  we 
listed  everything  we  had  that  we  could  not  use  in  our  war  effort,  and 
under  that  policy  2,020  machines  have  been  sold  to  others  for  war 
work,  anything  right  out  of  our  plant ;  1,019  were  sold  to  the  Govern- 
ment; 3,602  were  transferred  between  plants  in  General  Motors,  and 
480  were  transferred  to  our  subcontractors.  That  is,  if  we  had  a  job 
for  a  subcontractor,  and  he  didn't  have  a  machine,  but  we  had  one  that 
was  surplus ;  we  transferred  it  to  him. 

Now,  the  point  that  I  am  making  here  is  that  while  those  3,500  ma- 
chines that  are  out  of  our  plants  in  subcontractors'  plants — some 
of  these  machines  we  sold  to  others,  I  understand,  went  to  England 
and  Russia,  even — you  might  say  these  machines  are  only  3,500  out  of 
85,000  and  therefore  we  ought  to  be  able  without  much  trouble  to  get 
90  percent  of  our  production.  That  is  not  so.  In  the  modern  mass 
production  of  things,  progressive  manufacture,  you  have  to  balance 
capacity  by  operations,  and  some  of  these  missing  machines  would  be 
bottleneck  machines.  In  other  words,  without  getting  them  back,  or 
their  equivalent,  we  couldn't  produce  anything,  so  not  only  do  we  have 
the  problem  of  unscrambling  the  Government-owned  facilities  and 
our  own,  but  we  have  the  problem  of  replacing  machines  that  are  lost 
in  our  production  lines  that  were  used  in  the  war  effort. 

Senator  Mead.  How  many  of  the  3,500  machines  that  you  men- 
tioned are  what  really  might  be  called  bottleneck  machines  %  A  large 
percentage  of  them  ? 

Mr.  Wilson.  There  are  enough  of  them  that,  as  I  say,  without  them 
you  can't  produce  anything. 

Senator  Mead.  Could  they  be  replaced? 

Mr.  Wilson.  Certainly  they  could  if  the  present  regulations  allowed 
us  to  do  it.  As  far  as  I  am  concerned,  that  is  one  of  the  recommenda- 
tions I  would  like  to  leave  to  you  gentlemen  today. 

The  Chairman.  That  is  the  prompt  removal  of  Government-owned 
machines  when  they  interfere  with  your  production? 

Mr.  Wilson.  No.  I  would  like  for  the  corporation  and  other  con- 
cerns in  the  country  who  are  in  a  similar  position  to  be  allowed  to 
place  orders  for  machine  tools  to  replace  their  pre-war  capacity  where 
they  gave  those  machines  up  for  the  war  effort. 

Senator  Mead.  And  where  the  machine  tool  would  be  vital. 

Mr.  Wilson.  That  is  right. 

Senator  Mead.  In  the  proper  operation  of  the  plant. 

Mr.  Wilson.  Of  the  business. 

Senator  Mead.  Yes. 

Mr.  Wilson.  That  is  one  of  the  things  that  would  be  relatively  easy 
to  do  that  would  save  much  time  in  the  reconversion. 

Senator  Ball.  May  I  ask  you  a  question,  Mr.  Wilson  ?  You  know 
quite  a  bit  about  the  machine-tool  industry.  As  I  understand  it,  we 
have  passed  the  peak  in  machine  tools  needed  for  the  war  effort.     Isn't 


8628     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

it  probable  they  could  begin  to  make  these  machine  tools  we  will  need 
for  peace  production  before  the  war  actually  ends,  since  this  steel 
shortage  is  out  of  the  picture  ? 

Mr.  Wilson.  They  should  almost  any  time  from  now  on.  I  will  give 
you  the  figures  in  General  Motors.  Altogether  we  have  put  on  order 
for  the  Government  and  other  agencies  61,000  machine  tools.  We 
had  received  a  month  ago  58,000  of  those  machine  tools,  so  that  we 
only  had  on  order  3,000  machines,  and  more  than  1,500  of  them  are 
currently  promised  for  delivery  this  month,  so  by  the  end  of  this  month 
we  will  have  on  order  for  Government  work  perhaps  1,500  machine 
tools.  At  the  tightest  place  in  the  facilities  requirements  we  had  over 
18,000  undelivered  machines  on  order  in  one  month.  That  was 
the  backlog,  relatively.  In  other  words,  we  now  have  less  than  10- 
percent  of  the  machines  on  order  that  we  had  at  one  time,  and  I 
think  that  the  machine  tool  industry  could  start  to  replace  those  ma- 
chines. Perhaps  some  of  them  could  be  earmarked.  They  may  exist 
and  could  be  available.  If  we  knew  that  we  could  get  that  machine 
back  promptly,  that  would  be  one  thing.  I  read  Mr.  Keller's  tes- 
timony last  night,  and  he  made  a  point  that  he  would  like  to  know 
which  machines  the  Government  was  going  to  make  available  and  how 
much  they  would  want  to  charge  for  them.  I  would  like  to  know  the 
same  thing.  Perhaps  of  the  56,000  machine  tools  that  the  Government 
owns  that  are  now  in  our  plants  spread  all  around,  we  would  be  able 
to  use  some.  However,  they  are  not  usually  the  ones  that  are  bother- 
ing me  because  if  we  had  needed  them  for  our  war  work  we  would 
have  used  them  ourselves.  The  ones  we  sold  to  the  other  people  are 
not  the  kind  we  have  in  the  56,000.    You  understand  that. 

The  Chairman.  I  understand  that ;  yes. 

Mr.  Wilson.  And  that  is  why  it  is  so  important  to  us  to  have  those 
particular  machines  replaced. 

Senator  Mead.  Yes. 

Mr.  Fulton.  That  would  probably  be  true  of  other  companies  as 
well  as  yours. 

Mr.  Wilson.  I  am  quite  sure  that  is  right,  though  I  don't  know  that 
anyone  went  quite  as  far  as  we  did  in  opening  the  door  and  saying  "For 
the  good  of  the  country  take  anything  we  have  got."  They  went  a 
long  way,  I  am  sure  of  that.  In  Detroit  they  did  go  about  as  far  as 
we  did  because  we  went  along  together  on  it,  but  the  corporation  hap- 
pens to  be  integrated  somewhat  more  than  some  of  the  other  producers, 
so  that  we  are  mixed  up  perhaps  more  than  others.  That  is  the  point, 
rather  than  their  intent. 

Senator  Mead.  However,  it  applies  to  others  in  somewhat  less  de- 
gree, nevertheless  it  is  a  good  standard  to  apply  generally. 

Mr.  Wilson.  We  finally  had  under  our  policy  war  work  in  every 
plant  we  had  except  four  that  we  leased  to  other  people.  We  leased 
the  Fisher  body  plant  in  St.  Louis  to  the  Curtiss-Wright  Co.  We 
had  our  automobile  plant  in  South  Gate,  Calif.,  now  leased  to  Douglas. 
We  had  two  plants  in  Oakland,  Calif.,  leased  to  the  Quartermaster. 
They  wanted  them  for  storage  and  reshipping  capacity  to  handle  the 
material.  All  of  our  other  plants  have  war  work;  they  have  Govern- 
ment machinery  mixed  up  with  our  own,  scrambled  all  up  together, 
so  that  what  I  would  like  to  propose  is  something  that  definitely 
should  be  done :  No.  1,  that  as  the  machine-tool  industry  is  completely 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8629 

relieved  from  the  war  load,  not  to  interfere  with  it  in  the  slightest,  but 
as  it  is  relieved  of  the  war  load  it  be  allowed  to  accept  orders  and  have 
material  available  to  build  some  machines  to  replace  these  bottleneck 
machines  that  have  moved  out  Lord  knows  where. 

Second.  I  would  recommend  that  the  Government  decide  what  they 
want  to  do  with  their  facilities  and  machine  tools  and  say  which  ones 
are  available  for  purchase  and  which  are  not. 

In  the  conversion  to  the  post-war  peace  production  there  are  perhaps 
three  phases:  No.  1,  this  replacing  of  the  bottleneck  thing  so  that 
you  can  get  back  at  the  job.  No,  2,  we  don't  particularly  want  to  go 
backward  ourselves.  We  want  to  go  ahead.  We  would  like  to  mod- 
ernize our  plants.  If  some  of  these  Government-owned  machines  are 
more  modern  and  better  for  the  purpose  than  some  of  our  old  machin- 
ery, we  would  like  to  replace  our  old  machinery  and  use  the  best  thing 
there  is.  No.  3,  we  haven't  had  the  time  to  work  it  out  yet,  but  we 
think  that  we  should  prepare  for  some  more  capacity  than  we  ever  had 
before.  I  don't  know,  maybe  I  am  a  little  overenthusiastic  about  the 
automobile  business,  but  I  don't  know  anything  that  for  the  same 
amount  of  money  the  citizens  of  our  country  can  get  as  much  personal 
satisfaction  out  of,  and  if  we  are  going  to  expand  our  standard  of 
living  in  this  country  and  everybody  have  more,  I  don't  know  what 
it  is  that  they  would  like  to  have  ahead  of  a  nice  automobile. 

Senator  Connally.  Two. 

Mr.  Wilson.  All  right,  two.  I  will  go  with  you  on  the  two.  So  I 
think  we  want  to  do  our  part  of  this  job  in  the  country,  help  reemploy 
the  people,  help  raise  the  standard  of  living,  help  make  our  country 
a  better  country  so  that  we  also  do  better,  go  right  along.  Y£e  are 
going  to  have  to  have  more  capacity  than  we  had  before,  so  that  there 
are  three  phases  of  the  thing  I  am  speaking  about :  First,  destroy  the 
bottleneck  so  you  can  get  back  at  the  job,  then  you  will  have  something 
from  which  you  can  expand. 

Second.  Modernize  the  plants.  That  includes  not  only  the  machin- 
ery but  I  would  like  to  have  better  facilities  for  handling  the  people.  I 
would  like  to  have  better  cafeterias,  better  parking  lots,  better  ways 
of  taking  care  of  their  clothes.  I  would  like  to  have  better  loading 
docks  and  material-handling  facilities,  so  that  a  minimum  of  people 
have  to  work  in  the  cold  and  the  rain  loading  and  unloading  cars, 
and  so  forth. 

So  that  if  we  all  get  the  courage  to  go  ahead  as  we  should  in  this 
country  and  as  our  country  always  has  had  the  courage  to  do  in 
the  past,  I  don't  see  why  we  can't  push  the  thing  up  to  a  pretty  good 
standard  for  everybody. 

As  I  say,  we  don't  know  just  where  that  one  is,  because  we  haven't 
worked  at  it  yet,  but  I  think  it  is  timely  to  start  to  do  it,  and  I  don't 
think  the  people  of  our  country,  if  we  take  them  into  our  confidence, 
are  going  to  think  it  is  because  General  Motors  thinks  the  war  is  over. 

Senator  Meade.  In  connection  with  your  expansion  program,  when 
you  talked  about  increasing  the  use  of  cars  here  in  the  United  States, 
did  you  have  in  mind  increasing  the  shipment  of  cars  abroad  ?  What 
about  the  foreign  market? 

Mr.  Wilson.  We,  of  course,  don't  know  exactly  what  kind  of  post- 
war world  we  are  going  to  live  in.  After  the  last  war  we  thought  that 
the  world  was  safe  for  democracy,  and  an  American  businessman 


8630     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

could  do  business  any  place  all  over  the  world,  have  his  capital  re- 
spected, get  his  money  in  and  out  of  the  country,  his  profit  and  so 
forth.  We  found  out  afterward  that  that  was  not  so,  you  see,  so  we 
are  a  little  bit  disillusioned  about  it  and  frankly,  we  don't  know  what 
kind  of  post-war  world  we  are  going  to  live  in  and  we  don't  know 
exactly  what  to  do  about  the  export  business. 

I  think  the  politicians  are  going  to  settle  that  for  us ;  that  is,  not 
only  in  our  country  but  in  the  other  countries  over  the  world.  After 
that  is  settled,  we  are  going  to  go  along  and  do  what  our  country 
wants  us  to  do  about  it. . 

Senator  Connally.  May  I  ask  a  question  right  there  Senator? 
The  fact  that  there  has  been  a  cessation  of  automobile  building  during 
the  war  of  course  will  create  a  tremendous  upsurge  right  after  the 
war,  but  that  won't  necessarily  indicate  a  normal  condition.  I  suppose 
you  have  considered  that.  Of  course  you  will  consider  that.  In  other 
words,  there  will  be  a  shortage  of  cars  after  the  war  and  everybody 
will  want  a  new  automobile,  but  you  can't  judge  all  of  the  future, 
you  can't  expect  it  to  be  maintained  at  that  high  level,  can  you, 
unless  the  world  comes  back  mighty  fast  and  you  can  export  lots  of 
your  cars  ? 

Mr.  Wilson.  I  don't  know  that  I  want  to  burden  the  committee 
with  my  theories  about  that. 

The  Chairman.  We  will  be  glad  to  hear  you,  Mr.  Wilson. 

Senator  Connally.  I  am  talking  about  domestic,  primarily,  first. 

Mr.  Wilson.  We  are  talking  about  both  of  them. 

Senator  Connallt.  All  right. 

Mr.  Wilson.  Certainly  in  General  Motors  the  chief  executives 
have  the  responsibility  of  deciding  what  is  the  right  compromise 
of  capacity  in  handling  the  pent-up  demand  immediately  after  the 
war  as  against  a  longer  pull.  In  other  words,  if  we  tried  to  spend 
too  much  money  in  capital  investments  to  balance  the  law  of  supply 
and  demand  too  quickly 

Senator  Connally  (interposing).  Immediately. 

Mr.  Wilson.  We  would  have  an  expanded  plant  that  we  probably 
could  not  operate  for  a  reasonable  number  of  years,  so  we  have  the 
responsibility  to  our  stockholders  and  to  the  country  for  doing  a  sensi- 
ble job  on  that  one. 

Senator  Connally.  That  is  what  I  was  asking. 

Mr.  Wilson.  That  is  right. 

Mr.  Fulton.  Of  course,  Mr.  Wilson,  the  cars  you  produce— — 

Mr.  Wilson  (interposing).  But  we  are  going  to  be  fairly  optimistic 
about  it,  I  think.  In  other  words,  we  are  going  to  trust  the  country 
and  make  a  play.  We  are  not  going  to  play  it  too  loose.  You  under- 
stand what  I  mean. 

Senator  Connally.  Yes,  I  know. 

Mr.  Fulton.  Of  course,  new  models  produced  a  couple  of  years 
after  the  war,  with  perhaps  some  of  the  experience  built  into  them 
learned  during  the  war,  might  create  an  additional  demand  by  reason 
of  more  or  less  making  the  other  cars  obsolete. 

Mr.  Wilson.  Well,  I  have  said  several  times,  and  I  would  like  to 
say  it  again,  that  the  real  news  of  the  war  is  not  that  we  have  learned 
a  lot  of  things  in  the  war  that  we  can  use  in  our  peacetime  products ; 
the  real  news  is  that  our  American  methods  of  production,  our  know- 


INVESTIGATION    OF   THE    NATIONAL    DEFENSE    PROGRAM     8631 

how  about  the  business,  could  be  applied  to  the  mass  production  of  all 
these  war  things,  many  of  which  a  good  many  of  our  people,  not  only 
in  General  Motors  but  in  other  places,  had  never  even  seen  before. 
Anybody  who  really  understood  the  essentials  of  progressive  manu- 
facture, accurate  interchangeability  of  parts,  and  mass  production, 
could  take  the  blueprints  of  anything  and,  if  the  blueprints  were 
right,  he  could  make  it  in  quantity  effectively  and  efficiently.  That  is 
the  real  news,  and  that  is  the  one  factor  that  I  think  our  Axis 
enemies  overlooked.  They  didn't  think  we  could  get  together  in 
this  country  and  do  that  job. 

The  Chairman.  We  fooled  them. 

Mr.  Wilson.  I  think  we  fooled  them.     It  was  a  little  close,  though.. 

The  Chairman.  Yes ;  it  was  close.    The  18  months  are  what  saved  us. 

Now  I  wanted  to  ask  one  more  question,  Mr.  Wilson,  and  I  think 
we  have  covered  the  situation.  How  many  Government-owned  and 
constructed  plants  are  mixed  up  with  your  plants  ? 

Mr.  Wilson.  The  total  floor  space  of  the  plants  is  about  12,000,000 
square  feet.  There  are  14  of  them,  3  rather  large  ones  on  the  order  of 
2,000,000  square  feet  or  more. 

The  Chairman.  These  are  Government -owned  ? 

Mr.  Wilson.  These  are  Government-owned. 

Senator  Ferguson.  That  is,  each  of  them  is  2,000,000,  Mr.  Wilson  ? 

Mr.  Wilson.  No.  There  are  14  plants,  totaling  12,000,000  square 
feet,  in  round  figures.  Three  of  those  are  rather  large  ones  of  the 
order  of  2,000,000  square  feet  or  more.  The  others  run  down  to  as 
small  as  138,000  square  feet.    That  is  the  smallest  one. 

The  Chairman.  Are  any  of  these  plants  going  to  be  useful  to  you 
for  your  purposes  after  the  war  so  that  you  will  be  in  the  market  to 
purchase  those  or  lease  them  or  make  use  of  them  ? 

Mr.  Wilson.  Frankly,  we  don't  know.  We  haven't  put  the- 
time  on  it  yet  to  analyze  the  problem.  We  thought  we  would  sort 
of  find  out  now  when  the  country  thought  it  was  ready  to  go  at  the  job.. 
If  you  men  think  so  now,  we  will  put  a  little  time  on  it.  After  all, 
there  are  450,000-plus  of  us,  and  perhaps  if  two  or  three  hundred  of  us 
worked  at  it  in  total,  it  wouldn't  be  too  unreasonable. 

The  Chairman.  We  don't  want  you  to  neglect  your  war  work,  but 
we  do  think  you  ought  to  be  thinking  about  this  situation. 

Mr.  Wilson.  I  think  maybe  you  could  trust  us  on  that. 

The  Chairman.  I  think  we  could. 

Senator  Ferguson.  Mr.  Wilson,  you  think  it  can  be  done,  that  a  few 
can  concentrate  on  that  and  not  affect  the  war  effort  ? 

Mr.  Wilson.  Well,  that  certainly  is  particularly  true  in  General 
Motors,  the  way  we  are  set  up.  We  have  what  we  call  a  decentralized 
type  of  organization.  We  have  the  different  pieces  well  organized 
as  units  to  go  ahead.  They  have  got  definite  war  assignments.  There 
are  a  few  of  the  rest  of  us  who  try  first  to  work  out  the  policies  under 
which  these  things  operate.  As  the  war  situation  clarifies  itself  and 
we  have  settled  on  what  the  Government  wants  us  to  do  in  the  war 
effort,  we  have  always  in  General  Motors  tried  to  look  ahead  and 
straighten  out  the  policy  first,  and  then  decentralize  the  administra- 
tion, because  if  you  centralize  too  much  administration,  especially  in 
the  absence  of  clearly  defined  policy,  you  get  a  great  big  pool  and 
nobody  knows  what  is  going  on  it  it. 


8632     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

So  we  would  like  to  do  the  same  thing  we  did  getting  into  the  war ; 
We  would  like  to  have  the  facts  from  the  Government,  what  can  be 
done,  and  we  would  like  to  set  down  some  important  policies,  not  too 
many,  but  really  the  big  ones,  and  then  let  our  different  plants  start  to 
do  the  job  under  those  policies. 

As  I  said,  one  of  the  first  things  I  would  like  to  do  is  to  tell  each  of 
our  plants  to  replace  this  bottleneck  machinery,  and  I  would  like  to 
have  the  Government  let  us  place  the  orders  with  the  machine-tool 
people,  let  them  accept  it,  have  some  material,  not  interfering  with 
their  war  work,  but  every  once  in  awhile  they  have  a  spotty  condition 
and  they  could  do  a  little  work  on  it.  At  least,  we  would  have  all  the 
paper  work  behind  us,  and  that  would  save  some  time. 

The  Chairman.  What  effect  is  cancelation  of  contracts  going  to  have 
on  all  this  ? 

Mr.  Wilson.  Of  course,  that  gets  back  to  this  second  point  of  what 
we  will  do  with  the  physical  plants,  how  we  unscramble  these  things. 
Certainly  it  would  be  the  sensible  thing  for  the  Government  to  say 
which  machines  are  going  to  be  available,  and  on  what  basis.  Then  we 
can  say  which  ones  we  want.  We  would  buy  some  of  them  now,  just 
to  get  that  much  of  it  behind  us,  because  the  more  that  is  left  out  there 
to  be  settled  in  detail,  the  more  difficult  it  is  to  do  it  quickly.  You 
can  push  any  one  thing,  you  know,  and  get  it  done  almost  overnight, 
but  you  can't  push  thousands  of  things  that  way.  You  can't  make 
everything,  you  know,  a  red  ticket.  Then  you  get  right  back  to  where 
you  were  before.  You  can  give  preference  to  a  very  small  fraction  of 
something  and  help  get  that  done,  but  you  can't  do  the  whole  thing 
that  way. 

Then  we  would  like  to  know  what  we  can  do  with  the  surplus  that 
we  don't  want  or  that  the  Government  does  want.  We  would  like  to 
know  where  to  ship  it  and  what  to  do  with  it  to  get  it  physically  out 
of  the  way.  We  would  like  to  know  what  the  Government  wants  to  do 
about  the  $500,000,000  worth  of  inventory.  I  don't  know  whether  any 
of  you  men  have  ever  seen  $500,000,000  worth  of  anything.  I  never 
have,  but  I  know  it  is  an  awful  lot  of  stuff,  and  it  is  a  tremendously 
big  problem. 

Senator  Ball.  That  inventory  is  work  in  process,  I  take  it. 

Mr.  Wilson.  That  is  raw  material  and  work  in  process  in  our 
plants. 

Senator  Ball.  Is  much  of  that  going  to  be  useful  for  peacetime  pro- 
duction ? 

Mr.  Wilson.  Not  very  much. 

Senator  Ball.  Most  of  it  is  just  headed  for  the  scrap  pile? 

Mr.  Wilson.  Yes. 

Senator  Ball.  Then  the  policy  would  be  to  get  it  out  of  the  plant 
and  scrap  it  just  as  fast  as  possible. 

Mr.  Wilson.  That  is  correct.  We  are  trying  to  keep  that  down  to 
a  very  minimum.  In  the  first  place,  we  don't  want  any  excessive  in- 
ventory when  this  war  is  over.  We  don't  want  to  put  the  Government 
to  that  expense.  We  don't  want  it  in  our  own  way.  There  is  no  ad- 
vantage at  all  in  having  a  surplus  of  stuff  that  you  don't  have  to  have. 
So  that  we  are  trying  to  operate  on  a  flow  basis  with  the  minimum 
amount  of  material  and  work  in  process  that  we  can  have  and  still 
maintain  consistent  operations  in  our  plants. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8633 

So,  that  part  of  the  problem  comes  in  figures  to  about  $500,- 
000,000  worth  of  inventory ;  perhaps  three  hundred  to  three  hundred 
million  dollars  in  receivables.  The  Government  pays  us  on  the  aver- 
age of  about  33  days  now,  so  if  we  shipped  $355,000,000  worth  of  prod- 
ucts in  October,  perhaps  around  the  1st  of  December  they  will  owe 
us  maybe  $400,000,000. 

We  have  orders  with  subcontractors  and  materials  suppliers  for 
something  over  a  billion  dollars  worth  of  material.  We  have  asked 
all  of  those  suppliers  to  schedule  the  production  in  line  with  our 
requirements  by  the  month,  and  not  to  produce  in  excess  of  the 
needs.  We  have  a  plan  where  we  give  a  supplier  or  a  subcon- 
tractor an  order.  We  say  to  them,  "You  are  in  business  with  us. 
Here  is  the  job  that  is  to  be  done,  but  don't  buy  any  more  material 
than  you  have  to  buy  at  the  minute  to  keep  your  plant  going,  and 
don't  fabricate  any  more  of  it  than  you  need  to  keep  your  plant 
going." 

Then  we  have  a  system  of  releases  to  tell  them  month  by  month 
what  to  fabricate  for  us  against  this  big  order,  with  the  idea  that  some- 
time the  bell  will  ring  and  we  will  have  to  cancel  a  lot  of  stuff.  How 
much  they  are  going  to  charge  us  when  we  cancel  those  orders,  we 
don't  know.  Maybe  it  will  be  25  percent  of  the  total  output.  It 
might  be  less ;  it  might  be  more. 

So  if  you  gentlemen  want  to  try  to  appraise  the  whole  problem,  we 
have  in  receivables  and  inventory,  what  you  might  call  working  capi- 
tal items,  about  a  billion,  perhaps  a  billion  and  a  quarter  dollars,  that 
will  have  to  be  accounted  for  financially  and  settled.  The  paper  work 
and  the  money  are  one  thing;  the  physical  plants  are  another  thing. 
We  don't  want  to  get  tied  up  in  arguments  about  the  money,  the  tech- 
nicalities of  the  law,  from  the  point  of  view  that  a  new  group  may 
have  to  come  in  to  make  the  settlements,  and  have  our  physical  plants 
tied  up  in  the  meantime.  If  that  happens,  it  will  be  very  bad  for  the 
country.  Therefore,  it  is  going  to  be  very  bad  for  General  Motors  also. 

Senator  Ball.  What  does  that  sum  tied  up  in  working  capital  mean 
in  terms  of  your  financial  position  in  financing  your  conversion  to 
peacetime  production  ? 

Mr.  Wilson.  Of  course,  we  have  tried  to  be  a  little  far-sighted  on 
that  one,  and  we  have  a  V  loan  negotiated  for  a  billion  dollars,  so, 
if  the  thing  got  tight  financially,  maybe  we  could  wiggle  out  of  it 
some  way,  perhaps  better  than  the  smaller  concerns.  Maybe  they 
haven't  all  been  that  far-sighted.  I  don't  know.  We  hope  we  won't 
have  to  do  it  that  way.  We  don't  like  to  borrow  money.  After  the 
last  war,  we  had  a  mortgage  on  the  General  Motors  Building.  We 
all  remember  it  very  well,  and  we  don't  like  it  very  well. 

Senator  Ball.  That  V  loan  is  an  R.  F.  C.  loan,  with  a  Government 
guaranty  ? 

Mr.  Wilson.  That  is  right.  It  is  a  bank  credit  with  a  partial  Gov- 
ernment guaranty. 

Senator  Ball.  So  it  is  secured  by  those  inventories. 

Mr.  Wilson.  That  is  right.  It  is  a  plan  so  that  the  technicalities  of 
the  money  don't  get  in  the  way  of  trying  to  do  business.  I  think  it  is 
a  very  good  scheme  incidentally,  but  I  hope  it  won't  have  to  be 
used  to  its  ultimate  all  over  the  country.     I  notice  that  Mr.  Keller 

311932— 44— pt.  21 9 


8634     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

talked   about  his  similar  situation.    I  think  their  credit  range  is 
$250,000,000. 

Ssnator  Ferguson.  That  is  right. 

The  Chairman.  Mr.  Wilson,  I  think  we  have  covered  the  points  m 
which  we  are  interested.  If  you  have  any  further  points  you  want  to 
give  this  committee  at  this  time  or  at  some  future  date,  we  would  be 
glad  to  have  them,  either  now  or  at  a  future  date. 
=  Mr.  Wilson.  Just  to  sum  the  thing  up,  the  No.  1  thing  is  to  replace 
this  bottleneck  machinery.  That  will  save  important  months  getting 
back  out  of  it,  perhaps.  The  second  is  to  clarify  the  Government's 
policy  with  relation  to  its  facilities  and  inventories  that  are  scrambled 
up  in  our  plants.  The  third  thing  that  bothers  me — we  will  go  along, 
of  course,  with  anything  that  is  decided,  but  I  hope  you  won't  try 
to  do  too  much  planning  down  here  and  too  much  administration.  I 
hope  that  it  will  come  back  to  clarifying  some  of  the  policies  and  laying 
down  the  rules  of  the  game,  then  pushing  back  on  the  railroads  what 
the  railroads  are  going  to  do  and  pushing  back  on  us  what  we  think  is 
our  position. 

The  Chairman.  That  is  exactly  what  we  are  trying  to  lay  the  back- 
ground for  now,  to  get  rid  of  the  red  tape  and  get  the  job  so  we  can 
go.  I  don't  know  how  we  can  do  it,  but  that  is  the  reason  we  are  talking 
to  you,  trying  to  find  out  what  your  viewpoint  is. 

Mr.  Wilson.  Perhaps  in  many  ways  in  General  Motors  we  have  had 
the  biggest  experience  outside  of  the  Government  in  trying  to  run  a 
big  enterprise. 

The  Chairman.  There  is  no  doubt  of  that. 

Mr.  Wilson.  We  operate  105  plants;  we  operate  in  46  cities,  in  12 
States,  now.  We  have  found  that  the  only  possible  way  we  can  run 
such  an  organization  efficiently  is  to  study  the  fundamental  policy 
first  and  set  the  policy,  and  then  push  back  to  the  plants  the  ad- 
ministration and  detail  of  the  business.  The  other  way  to  do  it  is 
that,  in  the  absence  of  settled  policy,  you  try  to  administer  every- 
thing so  you  don't  set  any  wrong  precedents,  and  then  you  get  it  all 
down  in  a  big  pool  and  nobody  can  tell  what  is  going  on.  Then 
you  get  everybody  all  sweating  and  tied  up  because  you  can't  get 
action. 

Senator  Connally.  Your  policy  seems  to  be  a  good  one.  Haven't 
you  a  man  in  your  plant  who  can  run  for  Congress  ? 

Mr.  Wilson.  I  don't  know. 

Senator  Ferguson.  In  other  words,  Mr.  Wilson,  you  have  to  place 
the  responsibility  along  the  line.  That  is  what  you  have  in  mind,  that 
you  hold  them  to  a  policy. 

Mr.  Wilson.  That  is  right,  and  we  try  to  think  ahead  and  settle 
some  of  the  fundamental  things,  you  see. 

The  Chairman.  We  are  trying  to  get  a  pool  of  the  best  brains  in  the 
country  on  this  subject,  and  Senator  George  is  doing  the  same  thing. 
Senator  George  is  working  on  a  legislative  program  to  fit  this  situation. 
We  are  working  along  on  that  situation.  That  is  the  reason  we  are 
talking  to  you. 

Mr.  Wilson.  There  is  one  more  thing  I  should  like  to  say  about 
these  facilities.  We  are  willing  to  take  any  position  on  it,  all  the  way 
from  the  fact  that  we  don't  get  a  dollar's  worth  of  them  (we  are  still 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8635 

going  to  go  ahead) ,  or  down  to  the  point  where  we  take  the  very  maxi- 
mum we  can  possibly  use,  depending  upon  what  the  Government  wants 
to  do  about  it.     But  we  would  like  to  know  what  that  position  is. 

The  Chairman.  That  is  it.     You  want  that  answer. 

Mr.  Wilson.  The  second  thing  is  that  we  don't  expect  any  great  bar- 
gains for  General  Motors.  We  don't  want  the  country  to  give  us  any- 
thing. I  don't  believe  in  subsidies  ordinarily  for  anything.  I  don't 
happen  to  be  of  that  school.  I  don't  want  one  for  General  Motors. 
We  also  realize  that  politically  no  one  could  give  General  Motors 
a  bargain,  anyhow,  if  he  wanted  to.  It  wouldn't  be  good  politics 
for  any  of  you. 

Senator  Connally.  It  is  a  good  bargain  if  they  buy  your  cars. 

Mr.  Wilson.  That  is  where  we  expect  to  make  the  bargains  with 
the  people.  We  want  to  do  it  that  way.  We  like  to  be  treated  as 
well  as  the  rest  of  the  country  is  treated,  but  we  don't  want  any  pre- 
ferred treatment  of  any  kind. 

The  Chairman.  That  is  the  attitude  I  hope  they  will  all  take. 

Mr.  Wilson.  I  don't  want  you  to  look  on  those  of  us  down  here  as  a 
pressure  group  in  any  form,  because  we  are  not. 

The  Chairman.  You  are  here  at  our  invitation. 

Senator  Ferguson.  There  is  one  question  that  I  should  like  to  ask 
Mr.  Wilson.  You  mentioned  that  someone  else  may  terminate  these 
contracts.  Do  you  have  in  mind  that  the  same  people  who  made  the 
contracts,  the  contracting  officers,  should  be  in  on  the  termination,  that 
that  would  be  a  better  way  of  doing  it,  if  that  is  possible? 

Mr.  Wilson.  It  doesn't  matter  so  much  if  the  policies  are  clearly 
defined,  but  if  you  leave  it  only  up  to  general  equity  or  the  administra- 
tion of  it,  then  of  course  we  would  be  much  better  off  to  deal  with  the 
people  who  made  the  deal  with  us. 

As  Mr.  Hunt  said  very  aptly  not  very  long  ago,  money  is  nothing 
and  time  is  everything  in  war ;  after  the  war  is  over,  time  is  nothing 
and  money  is  everything.    Do  you  understand  ? 

The  Chairman.  Yes. 

Mr.  Wilson.  So  we  don't  want  to  get  caught  in  that. 

The  Chairman.  You  want  to  equalize  that,  if  you  can,  and  have  a 
common-sense  approach  to  it. 

Senator  Ferguson.  Did  you  have  in  mind  that  you  could  not  operate 
with  a  long  audit  ? 

Mr.  Wilson.  There  aren't  enough  auditors  in  the  world- to  do  this 
auditing  job  in  time  to  relieve  us  physically  of  the  necessity,  and  I 
don't  think  our  people  are  going  to  be  very  happy  in  this  country  to 
be  unemployed  for  any  great  length  of  time. 

Senator  Ferguson.  While  the  auditors  are  working  ? 

Mr.  Wilson.  That's  right.  I  don't  think  that  paper  work  should 
get  in  the  way  of  activity  and  the  creation  of  new  wealth.  We  can 
argue  a  lot  on  how  we  subdivide  the  wealth,  but  the  soundest,  simplest 
thing  is  to  create  some  new  wealth  and  properly  divide  up  the  new 
wealth.    That  is  the  thing  that  makes  the  country  sound. 

Senator  Mead.  Mr.  Wilson,  you  made  a  point  a  while  ago  in  favor 
of  your  contention  that  you  ought  to  be  permitted  to  modernize  your 
plant  and  expand  your  plant  facilities. 

Mr.  Wilson.  I  take  those  in  the  three  steps  you  see. 

Senator  Mead.  You  mentioned  three  steps. 


8636     INVESTIGATION    OF   THE    NATIONAL    DEFENSE    PROGRAM 

Mr.  Wilson.  Right  now  I  think  it  is  sound  to  allow  us  to  place 
orders  to  replace  this  bottleneck  machinery  so  we  can  get  something 
started  again,  and  then  expand  that.  The  second  thing  is  to  clarify 
this  matter  of  Government-owned  facilities  so  that  they  would  be  avail- 
able if  they  fitted  into  a  modernization  or  expansion  program,  either 
one.  Then  the  final  thing  is  where  we  are  going  to  go  in  effective 
capacity  with  relation  to  the  products  we  are  responsible  for  in  our 
part  of  the  industrial  expansion  of  our  country.  You  see, 
I  happen  to  be  on  the  optimistic  side.  I  think  we  can  have  a  better 
business,  we  can  have  a  higher  standard  of  living  than  we  have  ever 
had  in  our  country  if  we  are  smart  enough  to  do  it  right. 

Senator  Mead.  I  think  you  are  right,  but  in  contending  for  the  right 
to  expand  when  material  will  probably  be  critical  I  think  it  would  be 
well  for  you  to  know  that  I  believe  you  will  have  a  greater  market 
than  ever  before  throughout  the  world,  and  this  will  apply  to  every 
American  automobile  manufacturer,  because  you  will  find  now  that 
in  Africa,  India,  China,  in  Egypt,  and  Australia,  in  New  Zealand, 
and  throughout  the  islands  of  the  South  Pacific,  natives  are  driving 
American  trucks,  girls  are  driving  American  automobiles,  the  natives 
are  becoming  expert  in  the  repair  and  conditioning  and  servicing  of 
American  trucks.  For  instance,  in  Australia  I  believe  that  we  have 
thousands  of  American  trucks  manufactured  by  General  Motors  and 
other  American  companies  that  are  augmenting  the  existing  transpor- 
tation facilities  out  there.  Now,  the  presence  of  these  trucks,  the  fact 
that  men  and  women  are  driving  them  who  are  citizens  of  those  coun- 
tries, that  mechanics  are  learning  to  repair  them  and  service  them,  is 
in  my  judgment  building  up  a  reservoir  of  business. 

Mr.  Wilson.  You  don't  need  to  sell  me  on  the  business.  I'm  sold 
on  the  automobile  business. 

Senator  Mead.  I  am  not  selling  you  on  the  automobile  business. 

Senator  Ball.  A  pretty  good  salesman,  too. 

Senator  Mead.  We  have  sold  in  this  war  to  lend-lease  and  to  other 
activities,  other  nations,  that  will  be  in  the  market  for  our  product. 

Mr.  Wilson.  That  is  the  point  that  I  was  going  to  make  a  while  ago 
and  it  slipped  my  mind.  If  we  are  going  to  export  automobiles  and 
similar  kinds  of  things  we  know  how  to  make  well  in  our  country,  we 
are  going  to  have  to  take  other  things  back  from  those  countries  in 
return  for  those  goods.  We  have  to  balance  the  books,  so  to  speak. 
If  we  don't,  we  gradually  build  up  a  foreign  debt  and  then  some  day 
it  is  nothing  but  paper  and  there  is  not  much  accomplished  by  having 
our  people  do  a  lot  of  work  and  give  the  stuff  away  I  am  personally 
not  for  that.  I  think  it  has  to  be  a  two-way  street,  and  that  is  the 
point 

Senator  Mead  (interposing).  Secretary  Hull  has  pretty  well  taken 
care  of  that. 
'Mr.  Wilson.  I  hope  so. 

Senator  Mead.  If  given  support,  he  will  finish  the  job. 

Mr.  Wilson.  So  actually  the  best  thing  that  will  happen  for  the 
world  will  be  for  each  country  and  each  group  of  people  to  do  the 
things  that  they  can  do  the  best  and  then  trade  with  each  other.  That 
is  fundamental,  as  far  as  I  am  concerned.  But  it  is  no  good  for  us  to 
try  to  produce  a  lot  of  things  in  this  country  and  loan  money  to  other 
people  to  buy  them  from  us.    I  am  much  more  interested  in  raising  the 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8637 

standard  of  living  of  our  own  people.  There  are  still  a  good  many 
millions  of  people  in  this  country  who  would  like  to  have  more  than 
they  have  now  and  I  would  like  to  supply  that  demand  first.  I  will 
go  on  the  other  one,  too,  if  it  is  sound. 

Senator  Mead.  We  have  our  one-third.  But,  anyway,  there  are 
millions  of  people  all  over  the  world  who  are  now  handling  American 
trucks  and  automobiles,  servicing  them,  driving  them,  repairing  them, 
and  that  market  must  not  pass  to  some  other  model  after  the  war.  So 
there  will  be  a  great  field  for  our  product  all  over  the  world,  so  it  will 
help  raise  our  standards,  provided  we,  in  turn,  will  take  something  that 
they  furnish. 

Senator  Ball.  Can  I  ask  one  question,  Mr.  Chairman  ? 

The  Chairman.  Surely. 

Senator  Ball.  This  is  a  little  bit  off  the  Truman  committee's  juris- 
diction, but  I  am  wondering — you  talked  about  the  third  step  of  an 
expansion  after  the  war.  How  much  of  a  factor  in  the  decision  of 
your  directors  as  to  whether  you  will  expand  will  be  the  post-war 
deferral  policies  affecting  industries,  such  as  taxes,  antitrust,  labor 
relations,  and  that  kind  of  broad  policies. 

Mr.  Wilson.  You  have  asked  me  a  highly  intelligent  question  because 
they  are  factors  that  do  have  to  be  taken  into  account  by  anybody  who 
has  that  big  responsibility;  that  is,  the  more  encouragement  the  tax 
laws  and  the  policies  of  the  country  give  to  business,  the  more  courage 
the  businessman  has.  The  more  you  scare  him,  the  less  courage  he  has. 
That  is  a  very  simple  principle. 

Senator  Ball.  It  struck  me  that  the  only  way  we  can  maintain  em- 
ployment at  a  level  of  production  that  will  render  service  instead  of 
building  up  unemployment  is  to  encourage  enterprise  and  initiative. 

Mr.  Wilson.  The  Government  has  a  great  responsibility  to  find  some 
other  catalyst  than  war  to  keep  people  reasonably  employed. 

Senator  Ball.  So  the  sooner  after  hostilities  end  that  the  Govern- 
ment can  develop  such  policies,  the  sooner  business  will  feel  confident 
and  can  go  ahead  with  the  expansion  that  is  possible. 

Mr.  Wilson.  That  is  right.  There  is  one  more  interesting  thing 
about  the  present  war  business  I  would  like  to  take  a  minute  to  tell 
you  about.  You  hear  a  great  deal  about  the  changes  of  war  products. 
We  know  about  the  changes  in  peacetime  business.  We  have  all  gotten 
used  to  that.  We  brought  out  a  model  every  year,  we  tried  to  make 
things  better,  we  recognized  early  in  this  war  that  no  military  weapons 
were  good  enough  for  the  tough  life-and-death  job  we  had  to  do,  and 
if  anybody  could  figure  out  how  to  make  them  better  for  the  purpose, 
we  had  to  make  the  changes  and  make  them  better.  So  we  recog- 
nized that  and  said  that  was  part  of  our  job.  In  fulfilling  that,  we 
actually  have  several  hundred  engineers  and  technicians  at  the  battle- 
front  working  for  General  Motors,  and  the  services  have  cooperated 
with  us  in  a  highly  intelligent  way.  Those  men  are  in  uniform,  they 
have  a  special  insignia,  they  are  in  about  the  same  position  as  a  war 
correspondent,  and  they  are  there  to  bring  us  back  the  actual  tech- 
nical facts  about  how  this  stuff  works  in  the  battle  from  our  produc- 
tion angle,  and  bring  the  facts  back  in  the  shortest  possible  time.  I 
thought  you  men  would  like  to  know  that  that  was  part  of  what  is' 
going  on  now.  We  have  also  trained  this  year  over  40,000  soldiers  and 
sailors  and  officers  on  how  to  repair  and  assemble  and  service  the  prod- 


8638     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

ucts.  That  was  a  little  extra  job  that  we  thought  we  should  do  for  the 
country.  It  is  not  exactly  our  job,  perhaps,  but  in  actually  manu- 
facturing the  stuff  we  found  we  knew  more  about  it  from  that  angle 
than  anybody  else,  and  we  should  do  our  part.  We  trained  officers  to 
train  their  men.  We  trained  over  40,000  of  them,  and  that  is  in 
addition  to  the  200,000  new  employees  whom  we  had  to  train  to  work 
in  our  own  plants. 

Senator  Ferguson.  Have  you  enough  employees  now? 

Mr.  Wilson.  Mr.  Hunt  and  I  keep  a  record  all  the  time  of  the  things 
that  are  bothering  us  and  why  we  can't  get  out  more  war  production. 
These  things  are  divided  down  into  facilities,  materials,  engineering 
changes,  inspection  and  shipping  instructions,  and  labor  shortage. 
The  labor  problem  in  General  Motors  is  still  one  of  the  minor  ones. 
Now  we  have  recognized  the  manpower  thing  from  the  very  be- 
ginning. That  is  why  we  tried  to  put  war  production  in  all  of  our 
plant  cities  where  we  already  operated.  We  didn't  make  any  great 
big  expansion  at  any  one  place,  get  into  any  housing  problems  or 
hullabaloo  of  any  kind.  I  don't  think  you  have  heard  anything 
of  this  kind  about  General  Motors.  But  we  have  in  all  these  dif- 
ferent sections  of  the  country  gone  up  in  employment  recently. 
There  are  only  two  places  now  where  the  men  have  reported  that 
manpower  is  one  of  their  limitations  on  production.  All  the  other 
places  by  doing  this  advance  training  of  the  people,  by  training 
foremen  on  how  to  handle  the  people,  have  solved  this  problem. 
We  have  had  10,000  new  foremen  to  train  on  how  to  train  the  work- 
men, so  we  tried  to  train  them  first.  I  don't  want  to  be  immodest, 
but  perhaps  we  are  getting  a  little  more  efficiency  out  of  our  plants 
than  some  others  are,  and  we  should.  We  have  been  in  the  business 
longer.  We  know  more  about  work  standards  and  how  you  handle 
the  thing. 

Senator  Ferguson.  There  is  still  room  for  more  efficiency  by  the 
workmen. 

Mr.  Wilson.  We  are  trying  to  do  everything  better.  We  are  not 
too  satisfied  about  anything.  We  hope  to  do  better  all  the  time  in  all 
these  different  things  and  we  can. 

The  Chairman.  Thank  you,  Mr.  Wilson. 

Senator  Connallt.  Thank  you  very  much,  Mr.  Wilson.  It  was 
very  enlightening. 

The  Chairman.  Very  good. 

Let's  proceed,  gentlemen.1 

1  The  committee  at  this  point  heard  Brig.  Gen.  Walter  B.  Pyron  on  the  subject  of  the 
Canol  project  which  appears  in  Part  22  of  Hearings. 


INVESTIGATION  OF  NATIONAL  DEFENSE  PEOGEAM 


FBIDAY,   DECEMBER  3,    1943 

United  States  Senate, 
Special  Committee  Investigating 

the  National  Defense  Program, 

Washington,  D.  G. 

The  committee  met  at  10:30  a.  m.,  pursuant  to  adjournment  on 
Wednesday,  November  24,  1943,  in  room  357,  Senate  Office  Building, 
Washington,  D.  C,  Senator  Harry  S.  Truman  presiding. 

Present :  Senators  Harry  S.  Truman,  chairman,  Mon  C.  Wallgren, 
Harold  H.  Burton,  James  M.  Mead,  and  Homer  Ferguson. 

Present  also :  Eudolph  Halley,  executive  assistant  to  chief  counsel ; 
Brig.  Gen.  Frank  E.  Lowe,  executive  to  the  committee. 

STATEMENT  OF  WILLIAM  GREEN,  PRESIDENT,  AMERICAN 
FEDERATION  OF  LABOR 

labor's  program  for  conversion  from  war  production 

The  Chairman.  Mr.  Green,  I  think  you  had  a  statement  you  wanted 
to  make  to  this  committee  on  the  reconversion  program  in  which  we 
are  somewhat  interested.  If  you  want  to  read  that  statement  to  the 
committee,  I  will  be  glad  to  have  you  do  it. 

.Mr.  Green.  Very  well,  I  will  be  glad  to,  Senator. 

Senator  Truman,  members  of  the  committee :  The  report  of  this 
committee  presenting  outlines  of  problems  of  conversion  from  war 
production  1  deals  with  the  majority  of  elements  in  the  problem  which 
the  federation  has  been  considering.  We  realize  furthermore  that 
reconversion  will  probably  come  gradually,  the  first  part  after  the 
end  of  the  European  phase  of  the  war  and  the  second  after  the  con- 
quests of  Japan  and  its  possessions. 

Labor  is  vitally  concerned  that  the  problems  of  reconversion  shall 
be  dealt  with  promptly  and  for  the  purpose  of  getting  our  civilian 
economy  functioning  quickly  and  at  high  levels.  This  is  a  civilian 
job  which  must  be  guided  by  civilian  experience  and  which  will  deter- 
mine the  course  and  mold  of  civilian  industries  for  at  least  the  next 
decade.  It  will  determine  employment  and  consuming  power  for  the 
wage  earners  and  their  families. 

Labor  proposes  a  top  policy  council  consisting  of  representatives 
of  management,  labor,  farmers,  the  Senate,  and  the  House  of  Repre- 
sentatives, the  groups  that  in  the  last  analysis  will  determine  policies 
and  their  administration.  This  council  should  have  the  advice  and 
the  cooperation  of  the  permanent  Government  departments  with  a 
responsibility  in  this  field — Department  of  State  (international  eco- 

1  S.  Rept.  10,  Part  12,  78th  Cong.,  1st  sess. 

8639 


8640     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

nomics  and  trade),  Department  of  Commerce,  Agriculture,  Labor, 
Interior,  Federal  Reserve,  et  cetera.  These  agencies  should  serve  the 
committee  as  consultants,  not  as  voting  members. 

The  council  shall  be  charged  with  responsibility  for  making  the 
general  controlling  policies  to  be  followed  in  reconversion  by  govern- 
mental and  private  agencies. 

There  are  three  major  functions  to  be  performed  in  ending  our 
war  economy  and  facilitating  return  to  civilian  production.  To  this 
end  we  need  to  provide  for  war  contract  cancelation  in  the  way  that 
will  release  the  maximum  capital  to  invest  in  new  civilian  work;  an 
agency  to  dispose  of  Government  stock  piles  in  ways  that  will  not 
undermine  the  economy  and  its  markets ;  an  agency  to  dispose  of  such 
Government-owned  production  facilities  as  shall  not  be  needed.  For 
dealing  with  these  problems  the  federation  makes  the  following  recom- 
mendations : 

For  the  termination  of  war  contracts,  we  recommend  legislation  to 
authorize  the  council  to  develop  simple,  uniform  accounting  and 
claim-settlement  formulas ;  to  settle  claims  on  a  company  rather  than 
a  contract  basis ;  to  provide  authority  to  the  procurement  agencies  to 
negotiate  final  settlement  with  contractors  on  the  basis  of  policies 
and  procedures  developed  by  the  council;  to  make  partial  payments 
or  loans  on  disputed  claims  mandatory  in  order  that  the  contractor 
may  especially  resume  normal  operation ;  to  make  such  loans  without 
interest,  except  in  cases  of  overpayment;  to  provide  for  appeals  pro- 
cedure first  to  the  council  and  then  to  the  courts;  to  limit  the  func- 
tion of  the  Comptroller  General  to  that  of  investigating  fraud;  and 
to  provide  for  periodic  progress  reports  by  the  council  to  Congress. 

On  the  disposal  of  United  States  property,  equipment,  and  ma- 
terials, the  council  should  be  authorized  to  establish  policies  and  pro- 
cedures for  a  liquidation  of  this  property  in  such  a  way  as  to  stimu- 
late an  expanding  economy.  We  do  not  want  a  repetition  of  what 
occurred  after  the  last  war  when  Government  stock  piles  were  held 
off  the  market,  thus  creating  an  artificial  scarcity  with  resultant  in- 
flation. Nor  do  we  want  the  reverse  procedure — a  dumping  of  prop- 
erty on  the  market,  thus  preventing  speedy  conversion  and  recovery  of 
industry  and  mass  unemployment.  The  conflicting  interests  of  pro- 
ducers, wholesalers,  distributors,  retailers,  and  consumers  will  have  to 
be  reconciled.  As  in  the  case  of  termination  of  war  contracts,  policies 
should  stimulate  employment  and  production  to  the  greatest  possible 
extent.  It  has  been  estimated  that  the  value  of  Government-owned 
equipment  and  materials  may  run  as  high  as  $60,000,000,000,  and  that 
plants  owned  entirely  or  partially  by  the  Government  are  worth  many 
billions  more.  The  disposal  of  such  valuable  plants  and  goods, 
whether  to  be  scrapped  or  utilized,  should  be  placed  in  the  hands  of 
civilian  administrators  with  advisory  committees  representative  of  all 
interests,  responsible  for  planning  for  the  whole  economy — for  the 
benefit  of  businessmen,  small  and  large,  the  consumers,  the  farmers, 
and  the  workers.  There  is  too  much  danger  of  economic  disruption  if 
the  liquidation  of  such  huge  resources  is  not  timed  to  expedite  our 
return  to  peacetime  production  and  a  better  standard  of  living.  There 
should  be  one  administration  to  dispose  of  stock  piles  and  one  to  dis- 
pose of  buildings  and  unneeded  land.  Each  administrator  should 
have  a  committee  advisory  on  administrative  problems  and  repre- 
sentative of  labor,  employers,  and  farmers. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8641 

It  would  entail  legislative  action  to  create  a  representative  council 
with  such  broad  authority  and  the  necessary  administrators. 

In  addition  to  decisions  on  industrial  questions  which  will  deter- 
mine jobs  for  workers,  the  speed  with  which  settlement  is  made  on 
some  war  contracts  will  condition  the  length  of  unemployment  due 
to  reconversion  dislocation,  the  disposal  of  stock  piles  and  equipment 
accumulated  by  governmental  agencies,  Government-owned  plants  and 
machinery — all  are  coordinate  factors  conditioning  production  and 
employment. 

In  addition  to  these  agencies  to  terminate  war  production,  there 
should  be  an  administrative  agency  working  with  private  industries 
during  the  period  in  which  emergency  controls  continue. 

The  War  Production  Board  has  already  begun  to  allocate  the  stock 
piles  of  certain  materials  to  civilian  industries  for  expanding  com- 
mercial production.  The  War  Production  Board  with  its  experience 
in  conversion  and  its  direct  contacts  with  many  industries  and  with 
its  control  of  essential  materials,  would  be  admirably  adapted  to  the 
task  of  guiding  reconversion  with  these  two  major  provisos:  (1)  It 
should  operate  in  accord  with  the  policies  formulated  by  the  citizens 
policy  council  previously  recommended,  and  ,(2)  industry  committees 
should  be  revised  to  give  adequate  representation  for  labor  and  for 
small  business,  and  labor  assistants  to  the  directors  of  all  industry 
branches  should  be  added. 

It  seems  quite  appropriate  for  me  to  state  here  that  in  the  opinion 
of  labor,  Mr.  Nelson,  who  has  been  Chairman  of  the  War  Production 
Board,  has  done  an  excellent  job.  We  feel  that  he  has  rendered  very 
distinct  and  outstanding,  valuable  service  to  the  Government  while 
serving  as  Chairman  of  the  War  Production  Board. 

The  Chairman.  And  do  you  think  his  services  ought  to  be  con- 
tinued at  the  conclusion  of  the  war  ? 

Mr.  Green.  That's  what  I  wanted  to  point  out,  that  because  of  this 
valuable  training  and  experience  which  he  has  had,  he  is  especially 
well  equipped  to  continue  the  work  of  reconversion  and  renegotiation, 
and  all  that  goes  with  a  changed  economy  when  the  post-war  period 
arrives. 

I  know  of  no  man  at  the  head  of  any  Government  agency  that  has 
rendered  more  valuable  service  than  has  Mr.  Nelson  as  Chairman 
of  the  War  Production  Board. 

Machinery  should  be  authorized  and  put  into  operation  at  once, 
for  post-war  planning  should  begin  now.  For  example,  the  council 
might  direct  the  War  Production  Board  to  divert  excess  war  mate- 
rials to  the  production  of  machine  tools,  dies,  and  other  equipment 
essential  for  reconversion.  The  shut-down  necessary  for  reconversion 
may  be  materially  reduced  if  basic  equipment  is  ready  and  available. 

Such  governmental  machinery  would  develop  the  general  rules  and 
make  possible  the  return  of  responsibility  to  private  enterprise  and 
free  unions. 

During  the  change-over  from  war  to  civilian  production,  there  must 
be  replanning  and  retooling.  During  the  closing  down  of  war  plants 
and  conversion  of  industries  to  peacetime  needs  there  will  be  unem- 
ployment of  many  workers  for  longer  or  shorter  periods.  The  de- 
mobilization of  Government  war  workers  and  enlisted  soldiers  will 
introduce  more  change.    Advance  planning  and  coordination  of  efforts 


8642     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

by  all  managements  would  keep  unemployment  to  the  minimum.  But 
to  maintain  self-dependent  workers  during  intervals  when  they  can- 
not earn,  there  should  be  an  adequate  social  insurance  so  that  all  shall 
have  the  necessities  of  living.  The  American  Federation  of  Labor 
has  proposed  such  a  system,  which  is  before  Congress  and  known 
as  the  Wagner-Murray-Dingell  bill. 

Our  program  provides  for  demobilized  soldiers  as  well  as  for 
workers  incomes  for  those  unable  to  earn  because  of  sickness,  loss  of 
job,  permanent  disability,  and  old  age. 

Our  program  is  national  because  of  the  mobility  of  American 
workers  following  the  needs  of  industries  organized  on  the  basis  of 
economic  considerations  and  serving  national  and  international 
markets. 

Labor  asks  also  for  a  national  employment  service.  Since  indus- 
tries and  labor  markets  are  organized  to  meet  economic  needs,  the 
structure  of  the  United  States  Employment  Service  must  follow  the 
same  lines.  A  labor  market  is  coextensive  with  an  area  that  supplies 
workers  to  an  industrial  community.  For  example,  the  labor  market 
that  serves  Philadelphia  reaches  up  to  Trenton,  down  into  Delaware, 
to  the  west  into  middle  Pennsylvania,  and  to  the  east  into  New 
Jersey.  The  Alaska  labor  market  ties  into  Seattle,  while  that  of  the 
Hawaiian  and  other  Pacific  Islands  ties  into  San  Francisco. 

We  need  an  effective  United  States  Employment  Service  to  connect 
workers  with  jobs  and  managements  with  workers  throughout  all 
United  States  territory  with  the  least  loss  of  time. 

Social  insurance  is  dependent  upon  income  earning  and  can  be 
maintained  only  where  there  are  high  levels  of  employment.  Workers 
and  returned  soldiers  will  be  very  impatient  with  failure  to  provide 
them  with  jobs.  They  know  that  if  they  have  to  go  on  relief,  their 
independence  and  even  political  freedom  may  be  impaired. 

Social  insurance  safeguards  not  only  the  economic  independence  of 
workers,  but  private  enterprise  itself. 

Labor's  welfare  in  the  post-war  months  depends  upon  the  avail- 
ability of  jobs,  opportunities  for  vocational  education  and  retraining, 
a  federalized  employment  service  to  advise  workers  where  jobs  can 
be  found  and  employers  where  to  find  workers,  a  Federal  social- 
insurance  system  to  provide  workers  with  their  earned  right  to  incomes 
in  emergencies  that  prevent  income  earning,  a  return  to  standards  and 
working  conditions  geared  to  a  free  enterprise  and  established  by  col- 
lective bargaining.  The  American  Federation  of  Labor  accepts  its 
responsibility  for  conserving  and  promoting  its  interests  in  the 
transition  period. 

The  American  Federation  of  Labor  stands  ready  to  cooperate  with 
the  Government  and  industry  for  the  maintenance  of  our  free  institu- 
tions as  the  basis  for  the  better  world  for  which  we  hope. 

That  section  of  the  report  entitled  "Labor"  does  not  seem  as 
judicious  and  constructive  as  the  preceding  sections.  That  is  in  the 
report  that  you  prepared  a  short  time  ago.1  This  is  not  in  a  critical 
sense. 

The  Chairman.  We  are  asking  you  here  to  give  us  your  views  on 
the  subject,  Mr.  Green.     We  are  glad  to  have  them. 

Mr.  Green.  The  adjustment  of  wages  to  absorb  increased  costs  of 
living  has  been  far  from  automatic  as  the  report  seems  to  imply. 

1  S.  Eept.  10,  Part  12,  78th  Cong.,  1st  sess. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8643 

Quite  the  contrary,  labor  made  a  no-strike  pledge  to  the  President  and 
accepted  membership  responsibility  in  a  tripartite  board  to  stabilize 
wages.  But  the  administration's  part  of  that  agreement  has  not  been 
kept.  The  National  War  Labor  Board  was  deprived  of  its  status 
and  authority  and  wages  have  been  frozen,  very  largely  so.  The  auto- 
cratic veto  power  of  the  Director  of  Economic  Stabilization  was  then 
extended  to  other  agencies  determining  wages.  For  instance,  the 
railroad  situation.  Workers  have  relied  upon  working  long  hours 
to  get  income  to  meet  increased  living  costs.  Because  workers  are 
denied  the  right  to  increase  wage  rates  to  accord  with  increased  pro- 
ductivity and  employers'  capacity  to  pay,  we  shall  endeavor  to  restore 
equity  by  insisting  that  peacetime-hours  standards  shall  be  established 
without  reductions  in  earnings. 

High  wage  rates  do  not  necessarily  mean  high  labor  costs.  The 
committee  falls  into  the  same  error  that  many  business  people  do  in 
its  emphasis  in  stating  that  "the  cost  of  labor  constitutes  a  large  por- 
tion of  the  costs  of  production."  Most  businessmen  view  their  labor 
costs  in  terms  of  number  of  dollars  rather  than  the  relationship  of 
their  labor  costs  to  the  value  of  their  product.  According  to  the 
Census  of  Manufactures  for  1939,  labor  costs  in  the  various  industries 
ranged  from  the  lowest  of  5  percent  to  the  highest  of  less  than  28 
percent.  The  average  relationship  in  all  manufacturing  was  that 
labor  costs  made  up  only  16  percent  of  the  total  value  of  the  products 
manufactured.  If  wages  had  been  raised  5  percent,  the  increased 
value  of  the  product  would  have  been  only  eight-tenths  of  1  percent, 
a  sum  which  in  many  cases  would  have  been  readily  absorbed  in  profit 
margin  without  increase  in  price  of  goods.  But  the  number  of  d<  liars 
going  to  the  workers  and  offering  a  market  for  goods  produced  would 
have  been  about  half  a  billion.  Assuming  adequate  controls  against 
inflation,  it  is  the  axiom  that  the  greater  the  national  income  is,  the 
greater  the  market. 

While  it  may  seem  quite  contradictory,  Senator,  the  facts  show  in 
a  number  of  instances  that  an  increase  in  wages  has  not  increased  the 
cost  of  production.  Management  has  found  a  way  through  and  by 
which  it  can  absorb  that  increase  in  wages  without  passing  it  on  to 
the  consumer. 

The  Chairman.  Of  course,  mass  production  and  efficiency  of  labor 
in  production  is  one  of  the  ways  in  which  that  situation  comes  about. 

Mr.  Green.  That  is  what  I  mean.  It  puts  them  on  their  toes.  They 
develop  efficiency.  They  find  new  ways  and  means  by  which  they  can 
increase  production  corresponding  with  the  increase  in  wages,  and  as 
a  net  result,  they  find  that  the  increase  in  wages  has  been  absorbed 
and  it  hasn't  been  necessary  to  pass  it  on  to  the  consumer. 

The  Chairman.  Would  an  incentive  wage  add  to  that  efficiency  ? 

Mr.  Green.  Very  greatly. 

The  Chairman.  You  think  an  incentive  wage  would  have  that 
effect. 

Mr.  Green.  Yes;  I  think  so,  if  properly  and  constructively  applied. 
It  depends  upon  the  application  of  it  very  largely,  and  that  depends 
upon  management. 

Mr.  Hallet.  Mr.  Green,  do  you  think  it  is  possible  that  by  this 
increased  efficiency  management  may  decrease  the  total  number  of 
employed  persons  just  at  a  time  when  the  market  is  being  filled  with 


8644     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

other  unemployed  persons,  and  thus  add  to  the  unemployment  diffi- 
culties ? 

Mr.  Green.  I  don't  think  that  will  happen  during  the  post-war 
period,  because  you  must  understand  that  in  the  adjustment  that  will 
take  place,  there  will  be  a  reduction  in  the  number  of  hours  worked  per 
day ;  that  is  overtime  will  be  eliminated,  it  is  bound  to  be  eliminated 
and  that  means  that  then  they  must  maintain  a  larger  force,  perhaps 
on  a  shorter  workday  and  shorter  workweek. 

Mr.  H alley.  If  it  will  still  mean  though  that  by  the  efficiency  they 
could  pay  higher  wages  to  a  small  number  of  men,  would  you  prefer 
paying  the  higher  wages  to  the  smaller  number  of  men,  or  dividing  the 
total  wage  available  to  the  larger  group  ? 

Mr.  Green.  We  don't  want  to  create  an  army  of  unemployed.  What 
we  are  trying  to  do  on  any  wage  basis  that  may  be  established  is  to  find 
employment  for  all,  and  our  position  has  been  that  the  amount  of  work 
available  ought  to  be  distributed  among  all  who  are  willing  to  work, 
and  available  for  work,  and  that  can  be  done  by  a  reduction  in  the 
number  of  workhours  per  day  and  per  week,  work  less  hours  rather 
than  discharge  people. 

Mr.  Halley.  But  if  each  man  working  the  total  number  of  hours 
has  a  total  take-home  equal  to  the  take-home  of  a  man  working  48 
hours  a  week  now,  would  you  be  able  to  pay  that  total  number  of 
wages  ? 

Mr.  Green.  It  is  hardly  to  be  expected  that  a  change  can  be  made 
by  which  the  total  earnings  of  a  man  working  40  hours  can  be  as  much 
as  the  man  working  now  48  hours  with  overtime  payments,  without 
readjustment  of  wage  rates,  prices,  marketing,  and  so  forth.  It  seems 
to  be  economically  unsound. 

Mr.  Halley.  You  don't  go  that  far  ? 

Mr.  Green.  I  don't  go  that  far. 

A  demand  is  made  in  the  report  that  labor  be  -'realistic,"  and  in 
mentioning  the  "many  wages  adjustments"  which  shall  take  place  in  a 
return  to  peacetime  operations,  the  committee's  idea  of  being  "realis- 
tic" quite  obviously  means  that  these  wage  adjustments  must  be  revised 
downward. 

I  don't  know 

The  Chairman  (interposing).  Not  necessarily,  Mr.  Green.  It  has 
to  be  a  common-sense  approach  to  just  what  we  have  been  discussing. 
Efficiency  and  hours,  I  think,  is  the  situation  we  are  going  to  have  to 
face. 

Mr.  Green.  That,  I  am  glad  to  learn,  because  I  didn't  think  that  you 
had  that  in  mind,  for  what  we  do  need  is  to  maintain  a  high  consuming 
power,  as  high  as  we  can,  as  high  as  economic  conditions  will  permit 
so  as  to  create  a  market  for  the  sale  of  civilian  goods.  That  is  another 
objective. 

The  Chairman.  I  think  it  all  goes  in  a  circle  and  one  is  absolutely 
dependent  on  the  other. 

Mr.  Green.  Yes. 

If  industry  adopts  such  a  plan — that  is,  of  reducing  wages  on  a 
Nntion-wide  scale — it  will  be  cutting  off  its  own  nose.  An  example 
will  illustrate  this  point.  In  manufacturing,  when  the  workweek  is 
reduced  from  48  hours  to  40  hours,  and  when  the  number  of  war  work- 
ers is  reduced  by  what  will  undoubtedly  be  approximately  about  one- 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8645 

third  from  the  war  peak,  these  factors  would  reduce  the  annual  take- 
home  pay  to  about  one-half  of  the  workers'  income  at  the  time  of 
the  war  peak  if  no  counteraction  is  taken.  Thus,  if  the  annual  pay 
roll,  which  is  really  the  market  for  consumer  goods,  is  around  $40,- 
000,000,000  at  war  peak,  that  market  will  be  reduced  to  around  $20,- 
000,000,000  per  annum  after  the  war.  Would  not  industry  prefer  to 
have  a  market  of  $40,000,000,000  to  compete  for  rather  than  one-half 
that  size? 

Now,  that  is  an  analysis  of  that  situation.  Of  course,  we  all  realize 
that  when  the  change  comes  and  time  and  a  half  for  the  sixth  day  is 
terminated,  then  there  is  going  to  be  quite  a  change  in  the  take-home 
pay.  Furthermore,  in  this  section  that  I  referred  to,  your  commit- 
tee said : 1 

But  labor,  like  business,  must  recognize  and  fulfill  its  obligations  to  society. 
The  alternative  is  Government  regulation.     The  decision  rests  witb  labor. 

I  will  not  enter  into  the  invidious  distinction  you  make  between 
business  and  labor  responsibility.  The  statement  is  grossly  unjust 
in  view  of  labor's  war  record.  The  workers  of  the  United  States 
have  cooperated  almost  100  percent  in  the  unparalleled  output  which 
will  enable  the  United  Nations  to  win  this  war. 

Now,  may  I  ask  if  you  can  prove  .that  business  has  recognized  and 
fulfilled  its  obligations  to  society  in  any  more  satisfactory  way  than 
have  the  workers  of  this  country? 

In  fact,  we  have  now  reached  a  point  where  cut-backs  are  taking 
place  in  a  very  menacing  way,  and  war  material  production  plants  are 
being  stopped  because  labor  has  been  quite  productive  and  has  gone  up, 
up,  up  in  the  record  of  production  which  it  has  made  until  now  even 
before  the  war  ends  they  are  threatened  with  unemployment. 

Senator  Wallgren.  That  was  to  be  expected,  was  it  not?  As  we 
progressed,  they  acquired  the  know-how. 

Mr.  Green.  Yes. 

Senator  Wallgren.  And  we  expected  that  production  would  in- 
crease. 

Mr.  Green.  Yes;  but  we  didn't  expect  it  quite  so  soon,  because  it 
seems  like  we  are  still  a  good  way  from  the  end  of  the  war,  notwith- 
standing that  there  is  a  lot  of  optimistic  points  of  view  being  expressed. 

The  Chairman.  I  think  you  are  right  about  that  Mr.  Green,  but 
there  is  also  this  to  be  taken  into  consideration.  There  are  no  invid- 
ious implications  in  the  report  of  the  committee  as  between  labor  and 
business.  We  think  both  have  done  a  remarkable  job  during  the  war, 
but  in  the  construction  of  these  war-production  plants  in  some  specific 
instances,  particularly  the  ones  where  these  150,000  men  have  been 
reported  to  have  been  laid  off,  they  were  not  only  overbuilt,  but  the 
experience  in  their  operation  was  nothing,  and  when  they  learned 
how  to  operate  them,  naturally  the  efficiency  of  the  plant  increased 
and  the  necessity  for  the  increased  employment  descended. 

Senator  Wallgren.  Many  of  them  were  hoarding  labor,  too. 

The  Chairman.  Yes;  a  great  many  of  them  were  hoarding  labor, 
but  that  situation  is  naturally  one  that  would  work  out  of  an  ex- 
perienced war-production  program. 

Mr.  Green.  Yes. 

The  Chairman.  We  are  going,  in  my  opinion,  to  have  a  situation 
like  that  to  face,  and  that  is  the  reason  we  are  discussing  these  tilings 

1  S.  Rept.  10,  Part  12,  78th  Cong.,  1st  sess.,  p.  14. 


8646     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

with  you.  We  want  to  know  if  the  American  Federation  of  Labor 
has  a  plan  and  program  to  meet  that  very  situation. 

Mr.  Green.  Yes.     Probably  reference  to  this  will  help  us  a  little. 

The  Chairman.  It  won't  hurt. 

Mr.  Green.  Let  us  remember  that  labor  cannot  be  regimented  with- 
out also  regimenting  business.  Free  enterprise  cannot  continue  with 
labor  regimented  even  though  management  may  not  be  regulated  by 
law.  Administrative  bureaucracy  would  restrict  management's  free- 
dom, there  is  no  question  about  that. 

If  labor  has  a  responsibility  toward  society,  then  society  also  has 
a  responsibility  toward  the  millions  of  workers  in  this  country  who 
are  facing  problems  of  chaos  and  insecurity  in  their  personal  lives  be- 
cause of  unemployment.  If  industry  needs  consideration^  aid,  and 
reassurance  in  order  to  make  plans,  how  much  more  does  labor,  in- 
dividually far  more  helpless  than  individual  establishments,  need  the 
same  sort  of  treatment  and  with  equal  right?  Labor  alone  is  not  to 
be  blamed  if  all  does  not  go  well. 

The  Chairman.  We  are  not  blaming  anybody,  Mr.  Green.  We  are 
trying  to  get  the  responsibility  centered  in  the  whole  cooperative  ef- 
fort, as  we  discussed  the  other  night.  If  we  can  get  labor  and  man- 
agement and  the  producers  and  the  Government  to  appreciate  their 
responsibility,  then  this  reconversion  program  will  not  be  half  the 
task  that  it  will  be  if  they  are  pulling  against  each  other  and  each 
one  looking  out  principally  for  his  own  interests  and  not  the  interest 
of  the  whole. 

Mr.  Green.  Yes. 

Now,  there  is  an  implication  in  the  report,  in  discussing  the  hous- 
ing industry,  that  the  building  trades,  unless  they  assume  responsibility 
for  the  revision  of  building  codes  and  other  reforms,  should  be  blamed 
for  depriving  other  workers  of  better  housing  after  the  war. 

The  Chairman.  We  asked  Mr.  Gray  to  come  down  here  and  discuss 
that  today,  and  he  saw  fit  to  go  to  New  York  instead  of  coming  to  this 
committee. 

Mr.  Green.  Who? 

The  Chairman.  Mr.  Gray.  We  asked  him  to  come  down  here  and 
discuss  that  very  situation  and  give  the  Building  Trades  Council  view- 
point, but  he  chose  to  go  to  New  York. 

Mr.  Green.  Is  he  scheduled  to  come? 

The  Chairman.  He  was  scheduled  to  be  here  after  you  get  through 
today,  but  he  is  not  coming.  He  telephoned  the  committee  that  he  had 
to  go  out  of  town. 

Mr.  Green.  He  will  probably  come  later.  Will  you  continue  the 
hearings  ? 

The  Chairman.  Yes;  we  are  going  to  continue  these  hearings  in- 
definitely until  we  try  to  get  all  the  facts  together  where  we  can 
work  out  a  constructive  program. 

Mr.  Green.  In  your  statement,  on  page  15  where  you  refer  to  the 
use  of  prefabrication  and  the  use  of  new  materials,  you  say  that 
"every  worker  in  the  United  States  would  have  an  opportunity  to 
have  improved  housing  for  his  family"  under  those  circumstances.1 
It  does  not  seem  to  have  occurred  to  the  committee  that  with  full 

1  8.  Rept.  10,  Part  12,  78th  Cong.,  1st  sess.,  p.  15. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8647 

employment  "every  worker  in  the  United  States"  could  have  im- 
proved housing,  even  with  antiquated  municipal  building  codes,  for 
which  the  building  trades  are  most  certainly  not  solely  responsible. 

The  Chairman.  That  is  true.  They  are  to  some  extent  responsible 
but  not  entirely  responsible. 

Mr.  Green.  In  conclusion,  may  I  state  that  I  hope  the  committee 
will  consider  the  responsibility  of  society  for  an  improved  and  ex- 
tended Federal  slum-clearance  program,  long  overdue,  with  the  build- 
ing of  housing  projects  for  the  underprivileged — underprivileged,  be 
it  understood,  through  no  fault  of  their  own  but  because  of  lack  of 
opportunity  due  to  the  irresponsibility  of  society  and  the  Govern- 
ment toward  them. 

Now,  I  have  covered  it  in  that  brief  way  and  will  be  pleased  to 
answer  any  questions  that  you  might  care  to  ask  as  best  I  can. 

Senator  Wallgren.  Mr.  Green,  up  to  now  labor  and  industry  as 
well  have  had  rather  a  soft  program.  They  haven't  had  to  worry 
about  much  because  the  Government  paid  the  bill.  It  didn't  make 
any  difference  whether  they  were  building  ships  or  airplanes,  regard- 
less of  what  it  might  be,  the  Federal  Government  handed  out  the 
money.  In  other  words,  there  was  no  real  competition  as  far  as 
industry  was"  concerned. 
Mr.  Green.  Yes. 

Senator  Wallgren.  You  are  going  to  face  that,  of  course,  when  we 
hit  the  post-war  period. 
Mr.  Green.  That  is  right. 

Senator  Wallgren.  And  there  is  one  of  your  objects,  because  in- 
dustry, I  am  sure,  is  going  to  be  a  little  more  aggressive,  is  going  to 
get  out  in  the  field  and  try  to  meet  competition  with  other  firms,  and 
that  is  going  to  create  a  problem  for  you  as  well,  because  in  many 
instances  those  people  are  trying  to  exploit  labor  in  order  to  try  to 
keep  the  price  of  their  product  down. 
Mr.  Green.  Yes. 

Senator  Wallgren.  There  is  one  other  point,  too,  and  that  is  that 
under  the  most  favorable  conditions  we  are  bound  to  have  quite  a 
serious  unemployment  condition  during  the  post-war  period,  is  that 
not  true  ? 

Mr.  Green.  Yes. 

Senator  Wallgren.  Have  you  estimated  at  all  in  numbers  what  the 
unemployment  might  be? 

Mr.  Green.  No,  Senator.  We  are  working  on  that,  because  I  agree 
heartily  and  fully  with  you,  that  after  doing  all  we  can  to  find  a 
solution  for  the  post-war  unemployment  problem,  we  are  going  to  be 
faced  with  a  degree,  and  I  think  a  large  degree,  of  unemployment, 
because  you  can't  make  these  changes  overnight.  It  will  take  some 
time.  We  know  these  big  shipyards,  airplane  manufacturing  plants, 
munition  plants,  that  were  built  and  created  for  a  specific  purpose,  to 
produce  war  material, .must  of  necessity  close.  There  are  millions  of 
workers  employed  in  all  of  those  industries.  There  may  be  plants, 
like  automobile  and  others,  that  were  converted  from  civilian  use  to 
wartime  use,  that  can  reconvert  to  peacetime  use  in  a  rather  reason- 
able length  of  time,  and  thus  absorb  a  number  of  workers  back  into 
civilian  production,  but  there  will  be  an  exceedingly  large  number  of 


8648     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

plants  that  will  close  down  just  like  that,  just  automatically,  when  the 
pcst-war  period  arrives.  There  is  going  to  be  a  lot  of  unemployment, 
and  what  we  are  concerned  about  is  to  reduce  that  to  the  lowest  pos- 
sible minimum  to  bring  about  the  cancelation  of  contracts  quickly,  to 
renegotiate  settlements  quickly,  to  avoid  delay,  in  order  that  such 
plants  as  may  be  equipped,  fitted,  shall  resume  civilian  production 
quickly. 

That  is  one  reason  why  we  are  apprehensive  over  plans  that  are 
being  considered  for  the  cancelation  of  contracts.  We  think  authority 
should  be  conferred  on  somebody  by  act  of  Congress  automatically 
to  cancel  the  contracts,  and  then  instead  of  negotiating  for  settlement 
between  the  Government  and  the  employer  over  an  extended  period 
of  time  while  the  plant  is  idle,  that  these  negotiations  can  be  settled 
when  the  plant  is  in  operation. 

Senator  Wallgren.  When  you  refer  to  the  fact  that  there  are  cut- 
backs today  that  are  even  now  beginning  to  create  a  problem,  some 
of  those  cut-backs,  I  think,  have  come  about  by  reason  of  the  activity 
of  this  committee  in  pointing  out  that  many  workers  have  been  hoarded 
in  these  plants  and  that  the  plants  have  gradually  acquired  the  know- 
how  and  should  maintain  schedules  with  a  reduced  number  of  per- 
sonnel. That  has  come  about,  we  know,  in  several  plants,  such  as  the 
Dallas  plant  and  many  of  the  shipyards. 

Mr.  Green.  That  is  very  likely. 

Senator  Wallgren.  I  think  that  is  going  to  continue.  They  are 
going  to  work  on  that  now,  and  in  one  measure  that  might  sort  of  give 
us  a  start  toward  working  these  men  into  other  industry. 

Mr.  Green.  Yes. 

Senator  Wallgren.  However,  when  this  war  is  over,  not  only  will 
you  have  a  great  many  people  moved  out  of  war  plants  without  a 
job;  you  will  gradually  have  the  returned  soldiers. 

Mr.  Green.  That  is  right. 

Senator  Wallgren.  And  as  you  know,  there  are  a  great  many  of 
those.  I  can  see  ahead  of  us  a  very  serious  problem,  and  I  am  wonder- 
ing, too,  how  you  feel  about  the  machinery  that  we  have  in  this  coun- 
try at  the  present  time.  We  are  supposed  to  have,  we  know,  a  great 
number  of  machines  that  will  be  idle  when  the  war  is  over.  There 
has  been  some  talk  of  possibly  shipping  those  overseas  to  some  of  the 
foreign  countries  to  enable  those  people  to  rehabilitate  themselves. 
How  do  you  feel  about  that  ? 

Mr.  Green.  I  haven't  given  consideration  to  that  subject,  Senator. 
I  didn't  know  that  such  a  plan  was  being  considered. 

The  Chairman.  I  don't  know  that  it  is  being  considered,  but  it  has 
been  suggested. 

Senator  Wallgren.  It  is  being  discussed. 

Mr.  Green.  That  strikes  me  as  a  rather  practical  and  constructive 
suggestion. 

Senator  Wallgren.  It  is  all  right  as  long  as  the  products  that  are 
manufactured  are  not  shipped  back  into  this  country. 

Mr.  Green.  Yes.  May  I  point  out  that  one  encouraging  aspect 
of  the  post-war  period  is  this,  that  there  will  be  an  unusual  demand 
for  civilian  goods  when  the  post-war  period  arrives  because  so  many 
people  have  been  prevented  from  buying  the  civilian  goods  they  need, 
owing  to  priorities  and  Government  preference,  and  so  forth,  in  pro- 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8649 

duction,  and  the  market  for  civilian  goods  will  be  stimulated  because 
of  the  need  for  civilian  goods. 

Secondly,  there  will  be  a  buying  power  then  because  people  are 
making  some  money  and  they  will  have  some  money  when  the  post- 
war period  arrives,  so  that  if  that  can  be  centered  along  right  lines 
wisely,  we  can  cushion  the  shock  that  will  come  from  the  economic 
changes  that  will  take  place.  It  will  be  a  matter  of  reconverting 
civilian  production  industries  as  quickly  as  possible  so  as  to  supply 
this  market  with  civilian  goods.  I  place  on  that  a  great  deal  of 
importance. 

Senator  Wallgren.  I  wouldn't  put  too  much  importance  on  it.  It 
wouldn't  take  long  to  glut  the  market  again  with  those  products.  I 
know  we  will  be  busy  for  a  while. 

Mr.  Green.  Don't  you  remember  after  the  World  War,  with  all  of 
the  blunders  we  made,  there  was  a  period  of  unusual  industrial  activity 
following  the  close  of  the  war? 

The  Chairman.  That  is  true. 

Senator  Wallgren.  Yes;  but  not  for  any  great  length  of  time. 

Mr.  Green.  I  don't  recall  how  long  it  lasted,  but  we  ought  to  have 
a  longer  period  now  than  we  had  before. 

Senator  Wallgren.  Let's  hope  so. 

Senator  Mead.  This  will  be  much  more  important  for  the  reason 
that  this  global  war  has  absorbed  practically  all  of  our  manpower, 
leaving  very  little  to  do  many  of  the  civilian  tasks  that  are  neces- 
sarily postponed.  For  instance,  I  heard  from  the  mayor  of  one  fairly 
large  city,  and  they  have  been  forced  by  priorities  and  by  lack  of 
manpower  to  postpone  millions  and  millions  of  dollars  worth  of  public 
works,  and  unless  it  is  done  forthwith  when  the  war  is  over,  great 
damage  to  buildings  and  city  structures  will  result. 

Mr.  Green.  Yes. 

Senator  Mead.  And  so,  this  is  such  a  tremendous  war,  and  it  has 
taken  so  much  of  our  manpower,  so  much  of  our  necessary  goods,  that 
we  have  actually  postponed  years  of  work  in  this  country,  on  the 
railroads  and  in  cities  and  throughout  the  Nation,  and  I  think  that 
the  first  war  isn't  really  a  pattern  for  what  is  going  to  happen  after 
this  war. 

Mr.  Green.  Yes.  And  then  there  is  another  encouraging  aspect  of 
it,  and  that  is  the  need  for  extensive  home  building.  If  we  can  launch 
an  extensive  housing  program  following  the  war,  it  will  have  a  very 
helpful  effect. 

Senator  Ferguson.  Mr.  Green,  don't  we  have  to  get  the  pricing  of 
housing,  the  price  of  construction,  down  to  a  point  where  people  can 
afford  to  live  in  the  houses  that  are  built  ? 

Mr.  Green.  There  won't  be  much  trouble  about  that  for  some  time 
when  the  post-war  period  arrives,  because  everybody  will  have  some 
money  and  they  will  want  to  buy  homes.  They  will  need  homes. 
That  would  probably  come  later.     It  will  come. 

Senator  Ferguson.  Have  you  that  question  in  mind,  that  something 
can  be  done  along  that  line  ? 

Mr.  Green.  Yes.  We  are  thinking  about  that  and  giving  it  very 
serious  consideration,  because  you  couldn't  consider  a  housing  pro- 
gram without  considering  that  cost  item. 

The  Chairman.  Senator  Burton,  didn't  you  have  a  question? 

311932 — 44 — pt.  21 10 


8650     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Senator  Burton.  Mr.  Green,  I  am  much  interested  in  your  con- 
structive approach  and  the  work  that  you  are  doing  on  this  post-war 
period.  The  thing  that  impresses  me  about  the  difference  between 
this  post-war  period  and  any  other  post-war  period  is  the  size  of  taxa- 
tion and  the  burden  of  debt  that  the  Government  will  be  carrying  at 
that  time.  We  will  have  a  taxation  heavier  than  ever  before  in  the 
history  of  the  country  and  a  debt  10  times  greater  than  it  was  before 
the  war.  That  to  my  mind  means  that  in  order  to  carry  that  debt, 
which  we  must  carry  in  our  stride  because  that  is  our  bonds  and  our 
credit  is  tied  to  it,  we  must  have  not  merely  a  reconversion  to  pre-war 
industry,  but  we  must  have  a  larger  production,  a  larger  post-war  in- 
dustry than  our  pre-war  industry  in  order  to  carry  the  burden  of  taxa- 
tion involved.  That  means  we  must  not  only  consider  reconverting  to 
where  we  were  pre-war,  but  we  must  consider  means  of  actually  in- 
creasing the  national  production,  the  national  income.  To  do  that,  do 
I  understand  that  you  are  also  thoroughly  in  favor  of  cooperating  with 
developing  as  many  of  these  new  types  of  products  as  possible  %  I  re- 
fer to  such  things  as  going  into  new  fields — into  new  fields  of  aviation, 
radio,  electric  power,  automobiles,  Fiberglas,  plastics,  all  sorts  of  new 
types  of  things  coming  in. 

There  has  been  sometimes  a  resistance  against  going  into  new  prod- 
ucts because  people  were  afraid  they  would  put  some  old  product  out 
of  business,  but  this  time  it  seems  to  me  so  essential  that  we  have  a  new 
total  production  that  we  should  grasp  hold  of  every  new  proposed 
product,  and  we  need  the  support  of  labor  in  going  into  that  philoso- 
phy.    Do  you  agree  with  that? 

Mr.  Green.  Yes,  I  do.  I  think  that  is  an  excellent  idea,  Senator. 
We  would  not  join  with  anyone  in  trying  to  prevent  the  increased 
production  or  initial  production  of  some  new  civilian  need,  civilian 
good,  or  civilian  service.    That  is  tremendously  important. 

Senator  Btjrton.  That  is  one  of  the  things  that  comes  up,  inci- 
dentally, in  connection  with  the  housing  problem.  There  have  been 
new  developments  in  housing.  They  have  been  talking  about  pre- 
fabricated housing  and  things  like  that  that  perhaps  involve  less  labor 
of  the  same  kind  that  there  was  in  the  pre-war  period,  but  as  a  whole 
that  benefit  that  would  come  from  a  total  increase  of  production  of 
new  kinds  and  many  kinds,  it  seems  to  me,  is  of  great  national  im- 
portance. With  labor  taking  the  position  that  although  they  recog- 
nize that  to  substitute  a  new  article  for  an  old  article  temporarily  puts 
somebody  out  of  work  who  is  making  the  old  article,  there  is  no  better 
time  to  do  that  than  now,  if  labor  takes  that  position,  it  seems  to  me, 
of  promoting  every  possible  thing  that  will  add  to  the  total  production 
and  national  income,  it  will  be  a  most  helpful  and  constructive  thing. 

Mr.  Green.  Yes;  I  deeply  appreciate  the  serious  debt  problem  we 
will  be  called  upon  to  face  when  the  post-war  period  comes,  and  I 
know  that,  to  raise  the  amount  of  money  necessary  to  meet  our  obliga- 
tions, we  will  have  to  increase  productivity,  and  that  will  be  highly 
necessary. 

I  suppose  you  have  thought  of  the  demand  that  will  probably  come 
to  us  from  the  impoverished  nations  abroad,  too,  for  goods  and  ma- 
chinery and  material,  and  that  ought  to  stimulate  industrial  activity 
here  at  the  close  of  the  war,  because  the  power  to  produce  abroad  will 
be  almost  destroyed  for  some  length  of  time,  and  then  the  employment 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8651 

of  individuals  will  be  greatly  hampered,  and  because  of  the  lack  of 
food,  the  lack  of  everything,  there  will  be  a  tremendous  need. 

Senator  Burton.  That  leads  me  to  the  second  question.  I  appreciate 
your  pointing  to  that,  because  the  increase  to  a  greater  national  income 
for  America  needs  really  a  new  scale  of  production  and  a  new  scale  of 
world-wide  business  to  make  that  possible. 

Mr.  Green.  Yes. 

Senator  Burton.  Therefore,  your  emphasis  on  increased  foreign 
trade  is  an  important  factor  in  it.  Therefore,  you  would  say  that  in 
order  that  we  may  make  use  of,  for  example,  the  development  in  avia- 
tion, the  development  in  our  merchant  marine,  and  the  development  in 
our  increased  productive  capacity,  we  should  do  everything  we  can  to 
promote  a  foreign  market  for  it. 

Mr.  Green.  Yes ;  I  am  heartily  in  accord  with  that. 

Senator  Burton.  Taking  that  one  step  further,  of  course,  in  order 
to  have  a  good  foreign  market  they  have  to  be  able  to  pay  for  it. 

Mr.  Green.  That  is  right. 

Senator  Ferguson.  How  are  they  going  to  pay  for  it  ? 

Mr.  Green.  That,  of  course,  is  a  problem. 

Senator  Burton.  Right  along  that  line,  pressing  it  further,  in 
order  for  them  to  pay  for  it,  it  is  necessary  for  them  not  merely  to 
borrow  money  from  us  to  pay  it  back. 

Mr.  Green.  No. 

Senator  Burton.  We  want  them  to  create  wealth  over  there. 

Mr.  Green.  I  had  in  mind  that  they  must  find  a  way  by  which  they 
would  be  able  to  finance  such  purchasing. 

Senator  Ferguson.  You  don't  believe  in  just  making  it  by  American 
labor  and  then  sending  it  abroad,  without  being  paid  for  it. 

Mr.  Green.  We  can't  keep  that  up  indefinitely. 

Senator  Ferguson.  No. 

Mr.  Green.  We  are  doing  a  lot  of  that  now,  but  we  can't  keep  that 
up  indefinitely.     That  is  out  of  the  question. 

Senator  Burton.  With  a  view  to  leading  to  a  greater  over-all  pro- 
duction, a  greater  over-all  volume  of  business,  then  wouldn't  it  be 
consistent  along  the  line  that  Senator  Wallgren,  for  example,  was 
indicating,  if  we  can  actually  place  machine  tools,  productive  tools, 
and  invest  our  money  in  plants,  rather  than  loaning  the  money  in 
many  of  these  European  nations,  that  increases  their  own  productivity 
and,  therefore,  creates  a  larger  volume  of  business  and  a  larger  buying 
power  on  their  part  ?     It  is  to  our  interest  to  do  so. 

Mr.  Green.  That  impresses  me  as  a  very  practical  and  constructive 
suggestion. 

Senator  Burton.  My  next  point  is  that  in  the  kind  of  work  we 
would  be  doing  in  the  post-war  period  here,  if  we  would  be  doing  the 
work  in  private  industry,  commercial  enterprise,  producing  consumer 
goods  and  durable  goods  here,  that  go  into  industry,  that  produces 
money  from  which  we  can  pay  taxes. 

Mr.  Green.  Yes. 

Senator  Burton.  On  the  other  hand,  if  we  are  doing  mostly  public 
works,  that  doesn't  do  the  same  thing  at  all. 

Mr.  Green.  That  is  right. 

Senator  Burton.  Then,  do  I  understand  that  your  emphasis  in  the 
post-war  period  is  on  trying  to  get  men  back  to  work,  but  primarily 
back  to  work  on  private  productive  commercial  industry 


8652     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Mr.  Green  (interposing).  Primarily. 

Senator  Burton.  Rather  than  on  the  governmental  public  works. 

Mr.  Green.  That  is  right.  What  I  would  like  to  see  is  that  private 
industry  should  be  the  instrumentality  through  which  we  should 
absorb  all  of  these  workers  and  through  which  we  will  be  able  to  serve 
society,  earn  the  taxes  that  are  to  be  paid,  and  so  forth.  The  responsi- 
bility will  rest  upon  private  industry,  too. 

Senator  Burton.  Therefore,  while  you  do  put  some  emphasis  on 
social  legislation  and  on  unemployment  legislation  and  public  works, 
your  primary  emphasis  is  on  making  that  as  little  necessary  as 
possible. 

Mr.  Green.  Absolutely.  I  have  always  felt  that  way.  I  have 
favored  the  public  works  program  only  where  industry  failed  to  pro- 
vide opportunities  for  work  for  the  unemployed  as  a  remedy  for 
unemployment. 

Senator  Burton.  To  bring  that  about,  your  emphasis  would  be  on  a 
natural  procedure  through  incentive ;  that  is,  so  handling  our  taxation 
that  it  makes  it  possible  for  business  and  labor  to  develop  together  to 
increase  production. 

Mr.  Green.  Yes ;  and  I  think  that  the  Government  should  find  the 
way  by  which  they  could  offer  inducements  to  private  industry  to 
expand  and  develop  rapidly. 

Senator  Burton.  Just  to  turn  to  one  final  question  you  raised  at 
the  end  of  your  statement,  you  referred  to  the  interest  of  labor  in  slum 
clearance. 

Mr.  Green.  Yes. 

Senator  Burton.  Have  you  any  comment  on  the  situation  in  the 
District  of  Columbia,  on  the  need  for  some  slum  clearance  here  ? 

Mr.  Green.  Well,  I  hadn't  in  mind  going  into  any  local  situation. 
I  was  leaving  it  in  a  broad,  general  way.  I  am  not  sufficiently  ac- 
quainted with  that  situation  to  express  an  opinion  regarding  it. 

Senator  Burton.  I  thought  perhaps  it  had  come  to  your  attention 
that  in  the  Capital  there  is  a  substantial  amount  of  slum  area  here 
that  might  need  attention. 

Mr.  Green.  It  is  my  understanding  that  there  are  areas  here  where 
the  need  of  slum  clearance  is  very  great. 

The  Chairman.  Senator  Mead,  did  you  have  a  question  ? 

Senator  Mead.  No. 

The  Chairman.  Senator  Ferguson? 

Senator  Ferguson.  Mr.  Green,  I  take  it,  then,  that  your  answers 
indicate  that  you  believe  in  the  philosophy  of  plenty  when  we  come 
to  production,  rather  than  the  philosophy  of  scarcity. 

Mr.  Green.  Oh,  yes. 

Senator  Ferguson.  So  we  are  going  to  have  to  produce  a  great1 
amount.  You  said  that  you  felt  that  industry  had  a  great  responsi- 
bility in  employing  men. 

Mr.  Green.  Yes. 

Senator  Ferguson.  Don't  you  think  that  it  is  a  combination  of  what 
some  people  call  industry — I  like  to  refer  to  industry  as  being  manage- 
ment, labor,  and  capital — that  it  is  the  responsibility  of  those  three 
parts  which  is  really  industry  ? 

Mr.  Green.  Of  course,  I  meant  it  in  this  way :  Management  and  the 
owners  of  industry  own  and  control  industry;  labor  is  seeking  em- 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8653 

ployment,  looking  for  employment,  and  hoping  that  management  and 
the  owners  of  industry  will  afford  it  employment.  When  they  become 
employed  and  are  working  together,  then  it  is  the  duty  of  all  to  coop- 
erate— management,  labor,  and  I  might  say  the  Government  as  well. 

Senator  Ferguson.  But  management  and  capital  have  nothing  un- 
less they  have  labor. 

Mr.  Green.  No.  If  you  mean  that  labor  should  cooperate  with 
management  in  the  promotion  of  plans  and  ways  by  which  industry 
can 

Senator  Ferguson.  I  mean  in  producing  at  a  cost  at  which  industry 
or  management  can  sell.     Isn't  that  one  of  the  requirements? 

Mr.  Green.  Oh,  that  is  one ;  that  is  a  part  of  our  whole  economic 
scheme. 

Senator  Ferguson.  So  we  have  got  to  compete  with  other  indus- 
tries in  the  country  as  well  as  with  outside  industries  as  far  as  labor 
is  concerned. 

Mr.  Green.  That,  of  course,  is  another  phase  of  it,  and  that  is  com- 
petition between  industry.     I  was  considering  industry  as  a  whole. 

Senator  Ferguson.  As  a  whole. 

Senator  Mead.  Where  you  have  an  economy  based  on  high-wage 
standards,  as  is  the  case  in  this  country,  compared  with  countries  in 
Africa  or  Asia  or  any  other  part  of  the  world,  you  have  produced  mass 
buying  power  that  permits  mass  production 

Mr.  Green  (interposing).  Yes. 

Senator  Mead.  Which  permits  low  unit  cost. 

Mr.  Green.  That  is  right. 

Senator  Mead.  For  instance,  we  build  in  the  city  of  Detroit  a  million 
automobiles,  whereas  in  some  city  in  Europe  that  has  an  automobile 
factory  they  wont  build  a  million  automobiles  in  20  years. 

Mr.  Green.  Yes. 

Senator  Mead.  Therefore,  their  unit  costs,  even  though  their  wage 
standards  are  low,  are  higher  than  our  unit  costs,  even  though  our 
wage  standards  are  high. 

Mr.  Green.  Yes. 

Senator  Mead.  So,  where  you  have  mass  production,  you  must  have 
mass  consumption,  and  that  calls  for  a  fairly  high  wage  standard. 

We  have  in  this  country  still  the  one-third  that  is  below  the  stand- 
ard, and  we  can  effect  a  very  healthy  change  in  our  economy  by  pick- 
ing up  our  one-third  that  is  beneath  the  proper  standards  without 
doing  any  harm  to  our  economy  in  its  competition  with  the  world. 
In  one  family  here  we  may  have  two  or  three  automobiles,  and  in 
some  of  the  nations  they  wouldn't  have  one  automobile  per  thousand 
families.  That  must  be  taken  into  account,  and  we  must  keep  that 
healthy  condition  associated  with  mass  production  a  continuing  con- 
cern in  our  country,  and  that  calls  for  a  high  wage  standard. 

Mr.  Green.  Yes.  We  have  always  preached  that  sort  of  economic 
philosophy.  You  can  examine  the  record  carefully,  and  you  will  find 
that  labor  has  adjusted  itself  to  the  industrial  change  from  individual 
unit  production  to  mass  production  and  has  fitted  right  in  in  our 
mass-production  economy.  That  was  because  labor  saw  in  that  an 
opportunity,  you  see,  to  lift  their  own  economic  standards  to  higher 
levels,  because  if,  through  the  use  of  efficient  methods,  their  costs  could 
be  reduced,  wages  could  go  up. 


8654     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

It  is  a  singular  fact,  which  it  may  seem  contradictory,  that  the  low- 
est cost  of  a  produced  material  is  found  where  the  highest  wages 
prevail.  As  you  have  pointed  out,  where  there  is  abundance  of  labor 
employed  at  low  wages,  the  costs  are  higher.  A  large  number  of 
people  employed  in  a  mass-production  industry,  receiving  higher 
wages,  serve  to  produce  so  efficiently  as  to  reduce  the  cost.  You  will 
find  even  management  preaching  the  point  of  view  that  high  wages 
mean  low  costs,  particularly  if  it  is  accompanied  by  efficient  methods 
and  efficient  management.  So  we  have  preached  that  sort  of  philos- 
ophy ;  we  have  accepted  it,  and  we  shall  always  support  it. 

Senator  Ferguson.  You  view  the  post-war  period  in  a  good  light; 
that  is,  you  see  that  there  is  prosperity  ahead  for  this  Nation.  You 
are  not  pessimistic  about  it. 

Mr.  Green.  Oh,  yes.  I  pointed  out  awhile  ago  that  we  will  turn 
loose  a  tremendous  buying  power  for  civilian  goods  when  the  post-war 
period  arrives.  Just  how  large  it  will  be,  I  don't  know,  and  I  don't 
suppose  there  is  any  expert  in  America  who  can  correctly  determine 
what  that  buying  power  will  be.  Then  supplementing  that  will  be  the 
demand  for  goods  from  foreign  countries.  All  of  that  will  help  us  but, 
as  I  said  here,  that  ought  to  cushion  the  shock.  We  ought  to  reduce 
unemplovment  to  a  lower  period  than  we  had  following  the  First 
World  War.     But  in  spite  of  all  that,  we  are  going  to  have  some. 

Senator  Ferguson.  What  was  the  unemployment  following  the 
First  World  War? 

Mr.  Green.  I  didn't  assemble  the  facts.  It  was  pretty  heavy  for  a 
little  while. 

Senator  Ferguson.  That  is  in  the  first  few  months. 

Mr.  Green.  For  the  first  few  months,  but,  strange  as  it  may  seem, 
there  was  a  reaction  and  immediately  we  had  a  period  of  prosperity. 
It  came  along  and  lasted  for  several  years  during  the  First  World 
War. 

Senator  Mead.  It  gave  us  an  opportunity  to  work  out  a  permanent 
system. 

Senator  Ferguson.  Do  you  anticipate  that  our  permanent  system 
post-war  will  be  a  good  period? 

Mr.  Green.  I  think  it  will.  We  mnde  no  preparations  to  deal  with 
the  uost-war  problems  in  the  First  World  War  because  it  ended  so 
quickly  and  abruptly.  Now  we  have  an  opportunity  to  prepare,  and 
we  ought  to  be  able  to  cushion  the  shock. 

Senator  Mead.  We  have  the  greatest  merchant  marine  in  all  the 
history  of  the  world. 

Mr.  Green.  Yes. 

Senator  Mead.  We  have  practically  well  organized  the  greatest 
aviation  industry,  an  aviation  industry  equal  to  that  of  all  the  world 
put  together. 

Mr.  Green.  Yes. 

Senator  Mead.  Therefore,  with  a  well-directed  economy,  we  can 
penetrate  the  trade  areas  of  the  entire  world,  provided  we  have  a 
reciprocal  agreement  whereby  we  will  exchange  goods  with  them — 
raw  materials  for  our  finished  products,  for  instance. 

Mr.  Green.  Yes. 

Senator  Mead.  So,  in  my  judgment  the  possibilities  are  stupendous, 
if  we  can  take  advantage  of  our  newly  developed  aviation  industry 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8655 

and  the  equities  we  have  in  aviation  throughout  the  world,  and  also 
put  our  merchant  marine  to  work. 

Mr.  Green.  Yes. 

The  Chairman.  Are  there  any  other  questions,  gentlemen  ? 

That  is  all,  Mr.  Green.    Thank  you. 

Mr.  Green.  Thank  you  gentlemen.  It  has  been  a  very  pleasant 
experience.    I  have  enjoyed  it  very  much. 

Senator  Mead.  You  always  make  a  very,  very  rich  contribution  to 
our  well-being. 

The  Chairman.  The  committee  will  be  recessed  until  the  call  of  the 
chairman. 

(Whereupon,  at  11 :35  a.  m.,  the  committee  adjourned  subject  to  the 
call  of  the  chairman.) 

X 


INVESTIGATION  OF  NATIONAL  DEFENSE  PEOGEAM 


WEDNESDAY,  JANUARY  5,   1944 

United  States  Senate, 
Special  Committee  Investigating  the 

National  Defense  Program, 

Miami  Beach,  Fla. 

The  committee  met  at  10 :  15  a.  m.,  pursuant  to  adjournment  on  Mon- 
day, December  20, 1943,  in  the  Miami  Beach  Senior  High  School,  Sen- 
ator Harley  M.  Kilgore,  presiding. 

Present :  Senators  Harley  M.  Kilgore,  acting  chairman,  and  Homer 
Ferguson. 

Present  also:  Senator  Claude  Pepper,  Florida;  Rudolph  Halley, 
executive  assistant  to  chief  counsel ;  Brig.  Gen.  Frank  E.  Lowe,  execu- 
tive officer;  Lt.  Col.  Miles  H.  Knowles,  Office  of  the  Under  Secre- 
tary of  War. 

The  Acting  Chairman.  The  committee  will  come  to  order.  The 
first  witness  is  Mr.  William  G.  Ward.  Do  you  solemnly  swear  the  evi- 
dence you  give  in  the  matter  now  in  hearing  shall  be  the  truth,  the 
whole  truth,  and  nothing  but  the  truth,  so  help  you  God  ? 

Mr.  Ward.  I  do. 

TESTIMONY  OP  WILLIAM  G.  WAED,  ATTOENEY  FOE  THE  MIAMI 
BEACH  HOTEL  OWNEES'  ASSOCIATION 

ARMY  ACQUISITION  OF  HOTELS  IN  MIAMI 

The  Acting  Chairman.  Will  you  state  your  name,  residence,  and 
occupation  ? 

Mr.  Ward.  William  G.  Ward,  2604  DeSoto  Boulevard,  Coral  Gables, 
Fla.  My  official  connection  is  attorney  for  the  Miami  Beach  Hotel 
Owners'  Association. 

The  Acting  Chairman.  Mr.  Ward,  we  will  start  out  with  how  many 
hotel  owners  are  in  the  association. 

Mr.  Ward.  Approximately  140  to  145  at  this  particular  moment. 

Mr.  Halley.  And  how  many  are  there  at  Miami  Beach? 

Mr.  Ward.  Approximately  the  number  of  hotels  and  apartments 
involved  in  this  particular  matter  was  348 — hotels  and  apartments. 
Ours  are  all  hotels. 

The  Acting  Chairman.  Were  all  of  the  hotels  which  are  members 
of  the  association  taken  over  initially  by  the  Army? 

Mr.  Ward.  Yes,  sir ;  every  one  of  them  with  the  exception,  I  think, 
of  just  two  of  them. 

Senator  Ferguson.  All  but  two  hotels  were  taken  over  ? 

Mr.  Ward.  That's  right — of  this  particular  association. 

8657 


8658     INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM 

Senator  Ferguson.  But  what  percentage  of  total  hotels  was  taken 
over? 

Mr.  Ward.  In  Miami  Beach  are.  I  would  say  approximately  70  to  75 
percent  of  the  total  rooms  over  here  were  taken. 

The  Acting  Chairman.  Do  you  have  a  prepared  statement  you 
want  to  make  ? 

Mr.  Ward.  I  would  like  to  make  about  a  3-minute  statement  on  the 
facts  I  assume  will  be  admitted,  or  have  been  well  established  by  pre- 
vious hearings  before  the  House  of  Representatives  Military  Affairs 
Committee.  I  have  here  what  I  assume  is  the  official  statement  that 
General  Arnold  released  to  the  press  last  night  officially  from  Wash- 
ington, a  statement  from  which  I  will  quote  briefly. 

Senator  Ferguson.  There  was  a  release  last  evening  ? 

Mr.  Ward.  Yes.  This  is  from  the  Miami  Daily  News  last  night, 
released  out  of  Washington : 

Arnold's  statement  points  out  that  when  it  was  realized  that  an  officer  candi- 
date school  would  have  to  be  established  in  order  to  provide  administrative 
officers,  a  conference  was  called  February  18,  1942. 

It  was  brought  out  that  construction  of  facilities  would  require  3  months  and 
cost  approximately  $1,000  per  man.  (Over-all  housing  costs  through  leased  facil- 
ities was  $119  per  man.)  General  Arnold  called  in  Ma.i.  Gen.  Walter  R.  Weaver 
and  asked  him  how  soon  he  could  get  an  officer  candidate  school  under  way  at 
Miami  Beach.  It  was  then  that  General  Weaver  made  his  now  famous  reply, 
"Today  is  Wednesday;  may  I  have  until  Monday?"  The  following  Monday  the 
first  classes  were  conducted  in  leased  quarters  in  Miami  Beach. 

(The  document  referred  to  was  marked  "Exhibit  No.  910"  and  ap- 
pears in  full  in  the  text  above.) 

Mr.  Ward.  Now,  in  June  when  I  first  presented  this  matter  to ■ 

Senator  Ferguson  (interposing).  What  date  was  that  Monday? 

Mr.  Ward.  It  would  be  February  18 ;  that  was  Wednesday,  so  the 
date  would  be  the  following  Monday. 

Senator  Ferguson.  He  issued  it  on  the  18th  of  February  1942  ?  Was 
it  '42  or  '41  ? 

Mr.  Ward.  This  is  February  18,  1942,  which  was  on  a  Wednesday, 
and  possession  was  taken  5  days  later. 

Now,  on  the  first  report  that  was  taken  up  before  the  Committee  on 
Military  Affairs  of  the  House  of  Representatives  (the  first  report  being 
on  October  20, 1942,  and  the  second  one  on  February  17,  1943)  the  first 
one  is  House  Resolution  162  and  the  second  one  is  House  Resolution  30, 
the  analysis  of  those  reports  which  I  have  here  contained  in  a  Wash- 
ington release  I  will  read  only  because  the  digest  is  quicker  and  better 
than  any  report  which  I  could  make. 

Senator  Ferguson.  Mr.  Ward,  have  you  any  different  testimony 
from  what  was  offered  before  the  House  ? 

Mr.  Ward.  Yes,  sir.  We  were  not  permitted  to  testify  before  the 
House  and  none  of  the  hotel  owners  were  represented  before  the 
House.  This  is  a  finding  of  the  consolidation  of  the  House  com- 
mittee report  showing  this  condition. 

The  Acting  chairman :  There  was  no  testimony  from  hotel  owners  at 
all? 

Mr.  Ward.    None  whatsoever. 

Senator  Ferguson.  It  was  based  upon  testimony  from  someone 
else? 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8659 

Mr.  Ward  :  Apparently  so ;  apparently  from  the  analysis  of  Army 
leases  and  other  testimony.  None  of  the  hotel  owners  that  I  know  of 
were  ever  brought  over  in  that  picture. 

Mr.  Halley.  Had  the  hotel  owners  requested  the  right  to  testify  at 
that  time  ? 

Mr.  Ward  :  No,  sir ;  not  at  that  time. 

Mr.  Halley]  They  were  not  complaining  then? 

Mr.  Ward.  They  were  complaining;  yes;  but  not  at  that  stage 
[reading] : 

The  savings  effected  by  the  War  Department  in  the  outlay  for  the  lease  are 
shown  to  average  24  percent  less  than  the  amounts  paid  for  annual  rentals 
by  commercial  interests  for  corresponding  hotels,  for  which  the  amount  of  annual 
rentals  paid  by  commercial  operators  and  the  War  Department,  are  available.  In 
this  group  of  27  hotels  the  annual  rentals  paid  by  the  War  Department  for  25 
hotels  ranged  from  5  to  37  percent  less  than  the  amounts  of  leases  for  com- 
mercial uses. 

We  hope  that  in  this  investigation  a  committee  will  be  authorized 
by  Congress  to  either  rectify  the  situation  or  to  provide  for  an  investi- 
gating committee.  I  wish  to  state  that  in  my  many  conferences  in 
Washington 

(The  documents  referred  to  were  marked  "Exhibits  Nos.  911  t< 
916"  and  are  included  in  the  appendix  on  pp.  8938-8945.) 

Senator  Ferguson  (interposing).  Will  you  explain  what  you  mean 
by  an  investigating  committee? 

Mr.  Ward.  I  will  be  glad  to  elaborate  on  that.  In  my  many  con- 
ferences in  Washington  with  Army  officials,  I  met  with  the  most 
courteous  of  treatment  from  Colonel  O'Brien  and  his  staff,  and  we 
were  confronted  with  one  situation:  That  the  legal  point  was  raised 
that  there  was  no  right  on  the  part  of  the  Army  to  renegotiate  or  to 
reconsider  a  lease  where  it  would  not  benefit  the  Government.  It  was 
pointed  out 

Mr.  Halley  (inteprosing).  I  would  like  to  ask  this:  Did  the  ques- 
tion of  renegotiation  come  up  because  you  had  certain  proposals  which 
you  presented  to  the  Army? 

Mr.  Ward.  Yes,  sir,  We  at  that  time  requested  that  the  Army  ap- 
point one  individual  to  represent  them;  that  the  Truman  committee 
designate  an  individual,  and  that  either  between  the  two  or  through  the 
district  court  in  Miami  a  third  appraiser  be  appointed  to  investigate  the 
acquisition  of  some  three  hundred-odd  hotels  and  apartments  in  this 
very  hurried  and  hasty  manner. 

Mr.  Halley.  That  is  the  investigating  committee  you  referred  to? 

Mr.  Ward.  That  is  the  investigating  committee  we  asked  for  at  that 
time. 

Mr.  Halley.  What  is  the  purpose  of  that?  To  make  an  over-all 
general  investigation,  or  rather  to  spend  a  great  deal  of  time  going 
into  details  in  connection  with  each  individual  hotel? 

Mr.  Ward.  We  had  never  requested  that,  Mr.  Halley,  of  the  Tru- 
man committee  and  we  don't  expect  that  today.  We  want  to  present 
the  general  picture  of  the  situation,  the  method  of  acquisition,  the 
over-all,  general  basis  of  acquisition. 

Mr.  Halley.  I  understand  that,  but  the  question  is  this:  As  con- 
trasted to  the  investigation  you  requested  the  Truman  committee  to 
make,  was  this  other  committee  intended  to  be  one  which  would  ac- 


8660     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

tually  look  into  the  details  of  each  case  and  make  a  specific  recom- 
mendation in  each  case? 

Mr.  Ward.  That's  right ;  that's  what  we  requested  and  knowing  the 
Truman  committee  could  not  take  the  time  to  do  that  individually, 
but  we  were  confronted  at  that  time  with  this  possible  construction 
on  the  question  that  they  had  no  power  to  renegotiate.  It  was  pointed 
out  at  that  time  that  out  of  three  hundred  and  forty-odd  contracts 
which  had  been  entered  into,  and  with  the  evident  right  of  renego- 
tiation on  the  part  of  the  Army,  there  had  not  been  one  single  effort  by 
the  Army  to  renegotiate  any  of  those  leases  downward.  That  would 
mean  something.  It  means  that  the  whole  base  scale  was  considered 
low.    Now,  we  also  pointed  out 

Senator  Ferguson  (interposing).  You  have  in  mind  that  the  Army 
claims  they  can  renegotiate  downward,  but  they  cannot  renegotiate 
upward  ? 

Mr.  Ward.  Yes,  sir ;  that  is  exactly  what  the  contention  is,  and  I  must 
admit  that  in  my  opinion  there  is  some  legal  basis  under  the  present 
statutes. 

Senator  Ferguson.  Do  I  understand,  as  an  attorney,  you  do  not 
claim  a  legal  right  but  an  equitable  right? 

Mr.  Ward.  That  is  right.  There  are  no  legal  rights  that  I  know  of ; 
there  are  no  forums  to  which  our  wrongs  may  be  submitted.  I  wish 
to  point  out  this  feature :  It  might  be  a  semilegal  right.  Article  III  of 
the  amendments  of  the  JBiH  of  Eights  says : 

No  soldiers  shall  in  time  of  peace  be  quartered  in  any  house  without  the  consent 
of  the  owner,  nor  in  time  of  war  but  in  a  manner  to  be  prescribed  by  law. 

Senator  Ferguson.  But  you  do  not  claim  here  that  there  was  no 
consent  ?  You  do  not  claim  that  the  Army  arbitrarily  billeted  soldiers 
in  the  hotels? 

Mr.  Ward.  We  say,  Senator,  that 

Senator  Ferguson  (interposing) .  That  has  to  be  read  in  the  light  of 
the  Revolutionary  times  when  the  British  took  a  man's  home  and  bil- 
leted the  soldiers  in  it  without  his  consent. 

Mr.  Ward.  We  say,  Senator,  that  under  the  law  as  enacted  by  the 
Congress  of  the  United  States,  known  as  the  First  and  Second  War 
Power  Acts,  the  right  of  condemnation,  the  right  of  immediate  pos- 
session, was  provided  for,  and  then  the  question  of  compensation  was 
to  be  settled  later. 

Senator  Ferguson.  I  was  merely  asking  this  to  get  the  legal  angle. 

Mr.  Ward.  We  say  here  that  the  testimony  which  we  will  present 
for  your  consideration  will  show  that  there  was  such  a  condition  of 
haste,  of  some  hysteria,  of  some  methods  of  acquisition  that  would 
amount  in  a  court  of  law  or  a  court  of  equity,  had  we  opportunity  of 
redress  there,  to  at  least  a  technical  duress. 

Senator  Ferguson.  Was  it  haste  on  the  part  of  the  Army? 

Mr.  Ward.  Haste  on  the  part  of  the  Army. 

Senator  Ferguson.  And  on  whose  part  was  the  hysteria? 

Mr.  Ward.  On  the  part  of  the  hotel  owners. 

That  is  the  only  statement  I  care  to  make  unless  there  are  some 
questions. 

Senator  Pepper.  Have  you  made  any  comparison  of  the  rentals  paid 
by  the  armed  forces  for  the  hotels  used  in  this  area  as  compared  to  the 
rentals  for  hotels  used  in  other  parts  of  the  country,  or  did  other  in- 
vestigations disclose  any  such  comparison  ? 


INVESTIGATION  OF   THE   NATIONAL   DEFENSE   PROGRAM     8661 

Mr.  Ward.  The  Military  Affairs  report  shows  there  was  a  differen- 
tial of  about  331/3  percent  higher  in  the  Atlantic  City  base 1  than  down 
here  in  Miami  Beach.  Now,  in  addition  to  that  there  are  other  mat- 
ters  

Senator  Ferguson  (interposing).  That  is  33%  percent  higher,  com- 
pared to  what  the  commercial  rates  normally  would  be  ? 

Mr.  Ward.  No  ;  33%  percent  higher  was  paid  by  the  Army,  on  an 
average,  in  Atlantic  City  in  the  Army  occupation  there  than  here. 

The  Acting  Chairman.  What  was  that  33%  percent  based  on, 
square  feet  of  space  or  cubic  content,  or  what  ? 

Mr.  Ward.  Apparently,  Senator,  there  was  no  uniform  method,  and 
that  is  one  of  our  complaints. 

The  Acting  Chairman.  I  mean  in  their  report  what  did  they  use 
as  a  basis  ? 

Mr.  Ward.  Per  man,  per  room. 

Senator  Ferguson.  What  percentage  is  occupied  today?  You  say 
two  were  not  taken  over.  Can  you  give  us  how  many  are  occupied  or 
held  by  the  Army  ? 

Mr.  Ward.  There  were  109  apartments  and  hotels  released  last  July. 
I  think  there  were  only  36  hotels,  and  the  balance  were  apartments. 
There  were  13  released  in  the  fall  of  this  year,  if  we  want  to  group 
the  annex  of  one  of  the  hotels.  I  would  say  approximately  10  would 
be  a  more  conservative  estimate,  because  there  were  annexes  involved. 

I  notice  by  the  paper  yesterday,  or  the  day  before,  that  there  are  29 
more  that  are  contemplated  to  be  released  on  January  31  up  to  the 
surf  side  or  the  north  section. 

Senator  Ferguson.  Are  most  of  these  releases  on  the  demand  of  the 
owners  or  requests  of  the  owners  ? 

Mr.  Ward.  As  far  as  I  know  none  of  them  are  on  the  demand  of 
the  owners. 

Senator  Ferguson.  Voluntarily,  then,  by  the  Government? 

Mr.  Ward.  Yes ;  as  their  war  effort  requires. 

Mr.  Haluey.  Some  owners  have  requested  the  return  of  their 
property  ? 

Mr.  Ward.  Many  of  the  owners ;  as  a  matter  of  fact,  practically  all 
of  them  have  requested  the  return  of  their  hotels. 

The  Acting  Chairman.  Let's  get  this  down  to  something  on  which 
we  can  base  something.  In  the  first  place,  most  of  these  hotels  are 
what  are  known  as  seasonal  hotels ;  isn't  that  a  fact  ? 

Mr.  Ward.  Yes,  sir ;  tourist  type,  seasonal  hotels. 

The  Acting  Chairman.  What  is  the  length  of  your  peak  rental 
season  each  year? 

Mr.  Ward.  Peak  rental  would  operate  here  from  about  December  5, 
in  a  majority  of  the  hotels,  until  about  May  1.  There  are  exceptions, 
where  some  of  them  run  throughout  the  period  of  the  year.  Now, 
some  of  the  hotels — a  certain  class  of  hotel — perhaps  their  peak  would 
be  from  the  10th  of  January  to,  probably,  the  1st  of  April,  when  the 
racing  season  is  over. 

The  Acting  Chairman.  Now,  what  percentage  of  those  hotels  are 
closed  during  the  season  other  than  the  peak  season  ? 

Mr.  Ward.  Senator,  that  is  rather  difficult  to  answer,  because  in  the 
last  3  or  4  years  in  Miami  there  has  been  more  year-round  occupancy 

1  In  this  connection  see  Exhibit  No.  925,  appendix,  p.  8954. 


8662     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

and  operation  by  the  hotels.  Miami  Beach  has  become  more  of  a  sum- 
mer resort  in  the  last  3  or  4  years.  I  would  say  that  5  years  ago  at 
least  50  percent  of  the  hotels  closed  in  the  summer. 

The  Acting  Chairman.  What  is  your  normal  rate  in  seasons  other 
than  the  peak  season  ?     I  am  told  it  is  considerably  reduced. 

Senator  Ferguson.  How  much  compared  to  your  peak  rate? 

Mr.  Ward.  The  O.  P.  A.  allowance  has  been  fixed  here — the  O.  P.  A. 
rent  control.     It  is  fixed,  I  believe,  upon 

Senator  Ferguson  (interposing).  What  is  your  O.  P.  A.  date  of 
rental  % 

Mr.  Ward.  September  1,  1943. 

Senator  Ferguson.  And  when  were  they  fixed  at  that  date  ? 

Mr.  Ward.  They  were  fixed  on  that  date,  I  believe  the  first  order  was 
around  September  15  of  this  year,  and  later  amended  by  one  about  2 
weeks  later. 

Senator  Ferguson.  Was  there  no  rate  fixed  in  Florida  before  Sep- 
tember 1, 1943  ? 

Mr.  Ward.  The  general  act  provided  for  the  fixing  as  of  October  1, 
1942,  but  it  was  never  put  into  effect — the  Executive  order  was  never 
put  into  effect. 

Senator  Ferguson.  In  other  words,  Florida  had  no  rent  control  un- 
til September  15,  1943  ? 

Mr.  Ward.  Florida  did,  but  Dade  County  did  not. 

The  Acting  Chairman.  Why  was  that  ? 

Mr.  Ward.  Apparently  there  wasn't  any  necessity  for  it.  They  had 
it  in  Jacksonville  and 

Senator  Ferguson  (interposing).  Did  the  hotel  owners  have  any- 
thing to  do  wittt  that,  that  it  was  not  put  into  effect  here  ? 

Mr.  Ward.  Not  that  I  know  of. 

Senator  Ferguson.  This  was  a  critical  area,  as  far  as  housing  was 
concerned,  before  September  1943. 

Mr.  Ward.  Yes,  sir. 

Senator  Ferguson.  But  no  rent  control  ? 

Mr.  Ward.  No  rent  control 

Senator  Pepper.  Is  it  not  a  fact,  Mr.  Ward,  that  the  Army  and  Navy 
did  not, request  the  rent  control  until  that  time? 

Mr.  Ward.  When  it  was  requested,  it  was  granted — largely  requested 
through  the  armed  services  here. 

Senator  Ferguson.  Was  there  any  hearing  on  this  rent  control  ?  Did 
the  association  have  anything  ?    Were  they  called  in  or  consulted  ? 

Mr.  Ward.  No,  sir. 

Senator  Ferguson.  Now,  had  rents  advanced  between  we'll  say,  '39 
and  '40,  and  September  1, 1943,  at  Miami  Beach? 

Mr  Ward.  I  wouldn't  say  so,  Senator.  The  high  peak  here  was 
around  February  1942  when  this  acquisition  was  first  started  here.  I 
think  that  was  one  of  the  highest  rent  peaks  we  have  ever  had  in  Dade 
County.  That  was  right  in  the  middle  of  the  season,  just  as  today  is, 
practically. 

The  Acting  Chairman.  We  have  some  slightly  different  informa- 
tion here.  For  instance,  I  have  here  a  letter  which  states  that  2  years 
ago  one  certain  hotel  here  was  charging  $50  a  week  for  a  room  and  the 
same  people  are  in  the  same  room  at  this  time  paying  $147  a  week  for 
identically  the  same  room.    That  is  one  question  that  should  be  taken 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8663 

up  in  consideration  of  this,  also.  Lowell  Limpus  writing  for  the 
Times-Herald  of  Washington,  date  line  of  last  Monday,  complains 
that  the  cost  of  apartments  for  officers  and  soldiers,  and  rooms  for 
officers  and  soldiers  here,  in  hotels  not  under  Army  control,  is  pro- 
hibitive, running  as  high  as  $200  a  month  for  a  1-room  apartment  with 
kitchenette.  I  am  wondering  if  that  price  scale  runs  throughout  the 
year,  or  what  the  O.  P.  A.  is  doing  about  that.  We  should  consider 
those  things  also. 

Mr.  Ward.  The  analysis  of  the  O.  P.  A.  reports  has  not  been  made 
yet.  They  have  only  been  in  operation  here  for  a  few  months  and 
their  hearings  are  postponed  for  3  weeks  or  a  month,  as  far  as  rent 
complaints  are  concerned. 

Senator  Ferguson.  When  the  O.  P.  A.  fixed  these  prices  did  they 
mean  it  and  hold  them  at  that  particular  price,  or  is  that  article  correct 
that  they  are  charging  much  more  than  the  O.  P.  A.  rates  ?  This  head- 
ing is  rather  a  startling  heading,  "Miami  tourists  landlords  keep 
soldiers  broke" — and  that  is  dated  January  2. 

Mr.  Ward.  Senator,  you  will  have  to  take  into  consideration  the 
fact  that  there  are  several  angles  to  the  Miami  and  Miami  Beach  sit- 
uation. Miami  itself  has  its  own  problems  that  are  distinct  from 
Miami  Beach. 

Senator  Ferguson.  I  think  that  says  Miami  Beach. 

Mr.  Ward.  In  the  Miami  Beach  situation,  with  109  apartments  and 
hotels  thrown  back  last  summer,  without  having  any  prior  experience 
table  for  the  0.  P.  A.  period,  I  imagine  that  in  some  of  those  hotels 
they  have  had  difficulty  in  establishing  their  base  rate  of  what  is  to  be 
charged.  I  would  say  that  in  the  over-all  picture  of  Dade  County 
the  rental  situation,  while  high,  has  not  gotten  completely  out  of  hand. 
It  was  getting  that  way,  I  feel  sure,  last  summer. 

Senator  Ferguson.  Isn't  this  true :  That  if  a  base  rate  has  not  been 
established  as  of  a  certain  date,  before  you  can  charge  any  rate  you 
must  fix  it  through  the  O.  P.  A.  ? 

Mr.  Ward.  Yes;  you  have  a  chance,  as  I  understand  the  regula- 
tion— you  must  file  within  30  days. 

Senator  Ferguson.  Price  control  is  in  effect  in  Miami  Beach  ? 

Mr.  Ward.  It  is  based  on  the  first  30  days  of  your  new  operation 
unless  thejf  issue  an  order  otherwise.  I  do  not  intend,  Senator,  to 
imply  that  I  am  entirely  clear  on  O.  P.  A.  regulations.  There  have 
been  several  interpretations.  I  have  read  the  bulletin  many  times,  but 
the  wording  is  subject  to  considerable  argument. 

The  Acting  Chairman.  Just  a  minute.  I  understand  that  there  is 
a  strict  rule  against  smoking  in  this  room,  and  I  was  not  aware  of  it 
until  General  Lowe  informed  me,  so  will  there  please  be  no  smoking. 

Mr.  Ward.  I  should  like  to  explain  this  along  that  line:  Practi- 
cally every  hotel  in  the  Miami  area — Dade  County  area — has  set  aside 
approximately  20  percent  of  their  total  accommodations,  and  they 
have  furnished  flat  rates  for  single  or  double  rates  for  uniformed  men. 
I  think  that  has  been  generally  adhered  to  so  far  as  we  know. 

The  Acting  Chairman.  The  point  I  am  driving  at  is  this :  In  the 
study  of  the  rental  situation,  of  course,  complaint  is  made  on  both 
angles,  but  the  complaint  is  that  hotels  under  Army  control  are  really 
penalized  in  order  that  others  not  under  Army  control  may  profit 
enormously  from  the  enforced  patronage  of  the  families  of  servicemen 


8664     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

stationed  in  the  Miami  area,  and  I  think  that  situation  should  also 
be  gone  into  a  little  bit.  Here  is  one  hotel  over  here  that  is  under 
lease  and  complains  it  is  a  very  inadequate  rental  in  return  for  which 
they  are  not  able  to  meet  their'  bonded  indebtedness  and  that  sort  of 
thing.  Here  is  another  hotel  over  here  that  is  out  from  under  that 
situation  and,  in  accordance  with  a  letter  I  have  here,  that  hotel  this 
year  will  be  able  to  pay  75  percent  of  its  total  investment  from  the 
vastly  enhanced  revenue  due  to  the,  shall  we  say,  Army  occupation 
of  the  Miami  area.  These  officers  and  soldiers  are  here  under  orders, 
of  course,  and  they  have  no  opportunity  to  choose  where  they  will 
bring  their  families,  if  their  families  are  to  be  with  them,  and  we  should 
also  go  into  the  question  of  fair  adjustments  in  that  direction,  &s  well 
as  fair  adjustments  on  the  other  in  getting  our  evidence  together. 
That  was  the  reason  I  was  asking  these  questions. 

Senator  Ferguson.  The  O.  P.  A.,  then,  would  be  to  blame  if  they  are 
allowing  that  to  go  on. 

Mr.  Ward.  I  do  not  doubt  that  the  few  of  the  hotels  now  operating 
have  a  very  lucrative  proposition,  in  view  of  the  demand  and  the  lack 
of  facilities.     The  place  is  crowded. 

Senator  Ferguson.  This  20  percent,  do  you  mean  20  percent  of  the 
rooms  are  set  aside  for  servicemen  ? 

Mr.  Ward.  They  are  in  Miami — generally  in  Miami — and  I  pre- 
sume that  prevails  over  at  Miami  Beach. 

Senator  Ferguson.  Have  they  got  a  flat  rate  per  room? 

Mr.  Ward.  Not  to  exceed  $3  per  day,  single,  and  $5  per  day,  double. 
That  is  the  Miami  rate.     I  do  not  know  what  the  Miami  Beach  rate  is. 

Senator  Ferguson.  You  do  not  know  what  it  is  in  Miami  Beach? 

Mr.  Ward.  About  the  same. 

Mr.  Halley.  Do  you  know  whether  the  other  services,  such  as  the 
utility,  transportation  companies,  have  made  any  arrangements  for  the 
servicemen  and  their  families  ? 

Mr.  Ward.  I  do  not  quite  understand  your  question,  Mr.  Halley. 
Are  you  speaking  of  the  bus  companies  ? 

Mr.  Halley.  The  bus  companies  and  other  businesses  furnishing 
services,  such  as  restaurants  and  laundries. 

Mr.  Ward.  The  Miami  Chamber  of  Commerce  maintains  a  rent 
placement  bureau  there,  and  we  are  able  to  meet  the  demand.  We  have 
rooms  available  today  in  excess  of  the  demand,  in  private  homes.  We 
can't  give  them  luxury  accommodations,  but  there  is  a  peak  that  will 
overwhelm  us.  Right  before  Christmas  the  demand  was  quite  heavy, 
but  we  placed  1,440  cases  within  a  week's  time  and  the  demand  ceased. 

The  Acting  Chairman.  You  see,  Mr.  Ward,  there  are  at  lealst 
three  or  four  phases  to  this.  The  first  phase  is  whether  or  not  the 
initial  contract  arrived  at  was  arrived  at  fairly.  Of  course,  the  fact 
that  the  contract  was  signed,  that  is  to  show  if  there  was  some  sort  of 
coercion  in  the  signing  of  it.  The  second  one  is  in  process  now  and 
that  is  the  discussion  of  cancelation  of  contracts  and  a  fair  and  equit- 
able cancelation.  Of  course,  that  has  not  been  fully  developed  yet 
and  there  is  also  the  fact  that  the  Army  also  may  possibly  have  been 
forced  into  commandeering  property  in  order  to  protect  servicemen 
against  excessive  charges,  so  I  think  you  should  develop  those  three 
points. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8685 

Mr.  Waed.  Let  me  develop  those  in  reverse  order.  I  do  not  know  of 
a  single  hotel  or  apartment  in  this  area  that  has  ever  been  condemned 
for  the  purpose  of  housing  families  of  these  troops.  There  is  a  news- 
paper statement  to  the  effect  that  the  Flamingo  Hotel,  which  has  been 
occupied  and  is  occupied  by  the  Army,  will  be  condemned  under  the 
Navy  procedure.  They  have  used  condemnation  in  the  Federal  court 
in  all  of  their  acquisitions,  to  use  property  for  housing  of  the  families 
of  the  officers. 

Senator  Pepper.  That  was  by  the  consent  of  the  owners  of  the  hotel  ? 

Mr.  Ward.  That  I  can't  say.  I  am  inclined  to  think  it  was  not, 
Senator,  but  I  do  not  know. 

Senator  Ferguson.  Mr.  Ward,  can  you  give  the  committee  a  gen- 
eral description  of  conditions  here?  Pearl  Harbor  was  December  7, 
1941.  Then  we  come  into  '42.  What  was  the  condition  here  in  '42 — the 
beginning  of  '42 — January  ? 

Mr.  Ward.  Conditions,  as  I  recall — and  I  state  this  from  some  per- 
sonal experience 

Senator  Ferguson  (interposing).  How  long  have  you  been  attor- 
ney for  this  association  ? 

Mr.  Ward.  The  association  was  not  formed  until  March  2  or  3, 
1943. 

Senator  Ferguson.  Then  the  association  was  not  in  existence.  Mr. 
Rasco,  do  you  have  the  picture  ?    What  is  your  business  ? 

Mr.  Glynn  O.  Rasco.  I  am  an  attorney  and  executive  manager  of 
the  Hotel  Owners'  Association. 

Senator  Ferguson.  You  are  not  familiar  with  the  housing  situation 
here  in  Miami  Beach,  Mr.  Ward  ? 

Mr.  Ward.  I  am  familiar  with  it.  I  happen  to  be  president  of 
the  Miami  Chamber  of  Commerce  today,  and  I  was  active  then  at 
that  particular  time  you  speak  of.  I  was  serving  as  president  of 
the  Miami  Orange  Bowl  festival  where  we  had  to  house  thousands 
and  thousands  of  people. 

Senator  Ferguson.  Were  tourists  coming  here  in  the  beginning  of 
January  1942,. or  were  there  black-outs  and  such  a  condition  that 
these  hotels  were  not  being  used  ? 

Mr.  Ward.  These  hotels  to  my  own  knowledge,  because  I  had  to  try 
to  house  thousands  of  people  during  the  Orange  Bowl  festival,  were 
loaded,  filled,  notwithstanding  Pearl  Harbor.  We  turned  back  some- 
thing like  12,000  applications  during  the  Orange  Bowl  game. 

Senator  Ferguson.  That  would  be  an  outstanding  event. 

Mr.  Ward.  That  was  a  dead  period  here,  around  New  Year's,  and 
from  that  time  on  the  buildings  at  Miami  Beach  and  in  Miami  en- 
joyed, I  think,  one  of  their  finest  seasons  that  they  had.  We  have 
statistics  here  which  will  show  that. 

Senator  Ferguson.  The  actual  fact  that  war  broke  out  increased 
business  in  Miami  ? 

Mr.  Ward.  It  increased  it,  yes,  sir,  rather  than  depleted  it  because 
of  the  war  industry  here,  the  center  of  activity  here,  the  location 
of  Miami  in  relation  to  the  war. 

The  Acting  Chairman.  At  that  time  you  had  no  gasoline  ration- 
ing.   What  did  gasoline  rationing  do  to  you  ? 

Mr.  Ward.  Naturally,  with  gasoline  rationing,  there  was  some  cur- 
tailment, but  outside  of  certain  periods,  like  2  weeks  ago  when  we 

311932 — 44— pt.  21 11 


8666     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

had  a  shortage  here  of  gasoline  for  a  few  days,  other  than  that  there 
has  not  been  any  decided  shortage.     There  has  been  strict  rationing. 

Senator  Ferguson.  Are  you  on  the  same  basis  as  Washington,  as 
far  as  the  gallons  per  coupon  are  concerned  ? 

Mr.  Ward.  We  have  not  been;  we  are  now.  You  were  on  a  re- 
stricted basis  in  the  summer  and  early  in  the  fall ;  you  had  a  pleasure 
ban  on  and  we  didn't. 

Senator  Ferguson.  You  have  never  had  it  on  here? 

Mr.  Ward.  Yes,  sir;  we  had  it  on  here  for  about  6  weeks  last 
spring. 

Senator  Ferguson.  Just  for  a  short  period  ? 

Mr.  Ward.  Just  for  a  short  time ;  yes,  sir. 

Senator  Ferguson.  What  percentage  of  Miami  Beach  hotels  do 
you  represent? 

Mr.  Ward.  Mr.  Kasco  will  have  to  tell  you  the  total  percentage. 
If  you  figure  by  rooms  or  by  buildings 

Senator  Ferguson.  You  had  better  take  rooms.  That  would  be  a 
little  more  accurate  than  to  figure  on  buildings. 

Mr.  Ward.  The  association  represents  about  50  percent  of  the 
rooms  in  Miami  Beach.  Buildings,  I'd  say  probably  40  percent  of 
those  types  of  buildings. 

Senator  Ferguson.  When  you  have  been  speaking  here  you  have 
been  speaking  of  Miami  Beach  rather  than  Miami  ? 

Mr.  Ward.  Entirely  for  the  Miami  Beach  situation.  Correction: 
85  percent  of  the  rooms  are  represented  by  the  association  and  50 
percent  of  the  buildings.     I  refer  to  hotel  rooms. 

Mr.  Halley.  That  would  not  include  rooms  in  apartment  buildings  ? 

Mr.  Ward.  No. 

Senator  Ferguson.  So  that  the  record  may  be  clear,  will  you  give  the 
distinction  between  an  apartment  and  a  hotel — just  so  the  record  may 
be  clear  ? 

Mr.  Ward.  Well,  the  hotel,  as  we  consider  it  here,  carries  a  differ- 
ent type  of  license  with  it,  and  it  does  not  have  any  cooking  facilities 
or  housekeeping  facilities  connected  with  it.  The  apartment,  on  the 
other  hand 

Senator  Ferguson  (interposing).  Most  of  them  have  dining  rooms? 

Mr.  Ward.  A  great  many  of  them  have  dining  rooms.  The  smaller 
ones,  50  or  100  rooms,  don't. 

Senator  Ferguson.  But  it  is  the  housekeeping  facilities  that  dis- 
tinguish between  hotels  and  apartments? 

Mr.  Ward.  That  is  right.  There  is  just  one  other  point.  Mr. 
DuPree,  who  is  president  of  the  Miami  Beach  Eealty  Board  can  answer 
it.  The  problem — going  back  to  the  acquisition  and  where  I  think 
the  main  trouble  arose — is  that  the  valuations  and  the  leaseholds 
were  figured  entirely  by  the  Army  officers  on  the  angle  of  barracks — 
so  many  could  be  accommodated  per  room.  I  think  it  was  figured 
without  relation  to  the  value  of  the  hotels  and  the  public  space  in- 
volved. We  don't  pay  taxes  down  here  on  the  question  of  barracks. 
Taxes,  interest,  insurance,  amortization,  depreciation,  are  all  figured 
on  the  basis  of  investment  and  value. 

Senator  Ferguson.  This  lease  that  was  taken  did  not  exempt  the 
Government  from  taxation  or  the  building  or  furniture  from  tax- 
ation? 

Mr.  Ward.  No,  sir. 


INVESTIGATION   OP   THE   NATIONAL   DEFENSE    PROGRAM     8667 

Senator  Ferguson.  That  continued  as  a  personal  tax  and  the  real 
estate  tax  continued? 

Mr.  Ward.  Yes,  sir.  In  many  instances,  some  of  the  furniture 
was  removed  because  they  could  not  use  it  all  and  the  furniture  had 
to  be  stored  at  the  expense  of  the  tenant  which  made  a  great  expense. 

The  Acting  Chairman.  The  tenant?  Don't  you  mean  the  hotel 
operator  ? 

Mr.  Ward.  The  hotel  operator ;  yes  sir. 

The  Acting  Chairman.  The  tenant,  of  course,  under  the  contract 
was  the  United  States  Government  after  they  leased  the  property. 

Mr.  Ward.  That's  right,  sir. 

Senator  Ferguson.  Who  determined  whether  or  not  the  furniture 
would  be  taken  out ;  the  Government  ?  Were  all  buildings  leased  withi 
the  furniture? 

Mr.  Ward.  No,  sir.  I  think  Mr.  DuPree,  who  was  in  at  the  initial 
stages  of  that,  will  be  able  to  tell  you.  I  wanted  to  outline  the  facts 
which  I  assumed  were  more  or  less  considered  to  be  settled. 

The  Acting  Chairman.  Let's  get  Mr.  Tom  DuPree. 

Senator  Pepper.  Mr.  Chairman,  I  want  to  make  for  the  record  this 
statement  that  General  Arnold  made  here  on  Sunday  to  the  credit 
of  the  Army  and  the  apartment  owners :  That  the  availability  of  these 
facilities  and  their  use,  in  his  opinion,  has  accelerated  the  Army  Air 
Corps  training  program  6  to  8  months. 

The  Acting  Chairman.  Mr.  DuPree,  do  you  swear  that  the  evidence 
you  give  in  the  matter  now  in  hearing  shall  be  the  truth,  the  whole 
truth,  and  nothing  but  the  truth,  so  help  you  God  ? 

Mr.  DuPree.  I  do. 

TESTIMONY  OF  THOMAS  O'HAGAN  DuPREE,  PRESIDENT,  MIAMI 
BEACH  BOARD  OE  REALTORS 

The  Acting  Chairman.  Will  you  state  your  name,  official  connection 
and  address  ? 

Mr.  DuPree.  My  name  is  Thomas  O'Hagan  DuPree,  and  I  am 
president  of  the  Miami  Beach  Board  of  Realtors  and  a  citizen  of  Dade 
County  of  23  years'  duration.  I  have  been  actively  engaged  in  the 
real  estate  and  building  business  in  this  area  in  the  operation  of  apart- 
ments and  hotels  for  all  of  that  period  of  time  exclusively. 

The  Acting  Chairman.  Are  you  financially  interested  in  any  of  the 
hotels  that  are  under  lease  or  were  under  lease  ? 

Mr.  DuPree.  Yes,  sir. 

The  Acting  Chairman.  Personally  ? 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  How  many  of  them  ?     How  many  rooms  ? 

Mr.  DuPree.  I  am  interested  in  one  small  hotel,  several  apartment 
buildings — not  greatly  interested.  I  am  not  a  very  wealthy  man.  I 
have  a  small  interest  in  several  buildings,  but  not  heavily  interested  in 
any  of  them;  not  enough  to  bias  or  change  my  opinion  about  these 
matters. 

The  Acting  Chairman.  That  was  not  the  reason  I  was  asking  the 
question,  but  rather  to  get  first-hand  knowledge  as  to  financial  matters. 
When  you  invest  money  in  a  building,  you  figure  that  a  man  knows 
what  he  is  doing  in  his  investment  ? 


8668     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PPtOGRAM 

Mr.  DuPree.  I  would  have  known  more,  if  it  weren't  for  the  bust  in 
1926.  I  took  a  serious  licking,  but  the  only  reason  I  don't  have  more 
interests  is  because  I  did  not  have  more  money. 

ARMY    NEGOTIATIONS   FOR    LEASING    MIAMI    HOTELS 

The  Acting  Chairman.  Mr.  DuPree,  you  were  here  when  these 
hotels  were  being  leased  by  the  Army.  Can  you  give  us  the  facts  sur- 
rounding those  leases  ? 

Mr.  DuPree.  Well  the  first  five  hotels  that  were  taken  were  the 
Boulevard,  the  Allen,  the  Collins  Park,  the  Mayfair,  and  the  Dor- 
chester. 

The  Acting  Chairman.  Were  those  big  or  small  hotels  ? 

Mr.  DuPree.  Hotels  ranging  from  50  to  125  or  150  rooms.  Most  of 
those  hotels  were  full  at  the  time  they  were  taken  over. 

Senator  Ferguson.  They  were  filled  with  regular  tourists? 

Mr.  DuPree.  Regular  tourists. 

The  Acting  Chairman.  What  time  of  year  was  that  ? 

Mr.  DuPree.  In  February,  as  I  recall  it,  of  1942. 

The  Acting  Chairman.  All  right ;  go  ahead. 

Mr.  DuPree.  Those  leases  were  negotiated  by  a  man  named  Talley 
and  Lieutenant  Holleman.  Talley  was  a  civilian  with  General 
Weaver,  and  the  owners  of  that  property  had  to  give  back  people's 
money  and  get  them  out  in  24  hours.  There  was  real  pandemonium 
to  get  them  out.  The  troops  were  moving  when  the  hotels  were  taken 
and  then  there  appeared  on  the  scene  a  different  procedure. 

Senator  Ferguson.  You  did  not  own  any  of  the  five  which  were 
taken  in  the  beginning  ? 

Mr.  DuPree.  No,  sir ;  I  did  not. 

The  Acting  Chairman.  Do  you  know  how  they  picked  those  hotels  ? 

Mr.  DuPree.  I  think  they  picked  them  because  they  were  across 
irom  the  golf  course  where  the  parade  grounds  would  be. 

The  Acting  Chairman.  The  first  negotiation  was  to  get  the  golf 
•course  for  training  field  and  then  they  selected  five  hotels  across  from 
that  to  quarter  troops  ? 

Mr.  DuPree.  That  was  to  be  the  officer  candidate  school. 

The  Acting  Chairman.  For  administrative  officers  for  the  Air 
Corps? 

Mr.  DuPree.  That's  right. 

The  Acting  Chairman.  How  long  did  it  take  to  complete  negotia- 
tions there  ?  What  length  of  time  were  these  negotiations  carried  on 
before  the  leases  were  closed  ? 

Mr.  DuPree.  They  gave  notice  one  morning  that  they  were  going  to 
move  in  that  night. 

The  Acting  Chairman.  Were  they  going  to  do  it  by  legal  procedure 
or  did  they  have  a  lease  ? 

Mr.  DuPree.  They  came  in  and  said,  "We  would  like  to  take  the 
hotels  over." 

Senator  Ferguson.  Is  this  first-hand  knowledge  or  is  it  hearsay? 

Mr.  DuPree.  In  one  instance  I  was  present  at  the  conferences  and 
I  think  it  was  all  very  amicably  arranged,  but  I  think  the  element  of 
speed  entered  into  it  very  seriously,  because  the  people  had  to  be  moved 
out  very  quickly.    I  think  that  the  five  hotels  that  were  taken  over 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8669 

involved  no  dispute  as  to  the  price  that  was  paid.  They  paid  the  price 
they  normally  would  have  rented  for. 

The  Acting  Chairman.  That  was  on  an  annual  basis? 

Mr.  DuPree.  Yes,  sir. 

The  Acting  Chairman.  That  is,  if  I  were  renting  the  hotel  for  tourist 
trade,  it  would  have  been  at  about  the  same  price  the  Army  paid  for 
the  first  five  hotels  ? 

Mr.  DuPree.  About  the  price  the  Army  paid  for  the  first  five  hotels ; 
yes,  sir. 

Senator  Ferguson.  Then  you  would  see  no  complaint  as  to  the  first 
five? 

Mr.  DuPree.  I  don't  think  there  has  been  any.  Most  of  those  people 
are  my  friends.  I  have  known  several  of  those  hotels  and  I  have  never 
heard  the  people  complain  about  those  five. 

Senator  Ferguson.  Have  any  of  those  five  been  returned  ? 

Mr.  DuPree.  No,  sir.  They  are  all  still  part  of  the  officer  candidate 
school.  Then  they  moved  into  the  picture  here,  where  a  Captain  Fitch, 
for  the  Army,  who  set  up  an  office  to  take  over  more  hotels,  and  I  was 
asked  to  do  some  appraisal  for  the  Army  on  these  things. 

Senator  Ferguson.  Did  the  Army  seek  a  board  of  appraisal  ? 

Mr.  DuPree.  At  that  time  I  don't  think  they  did,  sir.  The  first 
proceedings  were  that  Fitch  came  here  with  his  force  and  he  con- 
tacted me,  wanted  to  know  if  I  did  not  want  to  go  to  work  for  the 
Government  in  a  capacity  and  I  told  him  I  couldn't.  Then  he  wanted 
to  know  if  I  would  do  some  appraising  for  him  and  I  told  him  I 
would  be  glad  to. 

Senator  Ferguson.  Do  you  know  how  he  wanted  to  employ  you  for 
the  Government  ? 

Mr.  DuPree.  I  was  getting  around  to  that.  He  said,  "The  only  way 
you  can  work  is  to  sign  a  contract  to  work  for  so  much  per  day."  I 
said,  "I  don't  need  the  contract ;  I  am  glad  to  do  it  as  my  contribution," 
but  he  did  get  me  to  sign  a  contract  to  appraise  on  the  basis  of  $25 
per  day.     I  don't  think  I  ever  worked  as  hard  in  my  life. 

Senator  Ferguson.  How  long  did  you  work? 

Mr.  DuPree.  I  worked  for  about  5  or  6  days  and  I  think  he  asked 
me  to  appraise  about  50  hotels.  He  was  calling  me  in  the  morning 
at  7  o'clock  and  again  at  12  o'clock  at  night,  and  I  told  him  I  couldn't 
appraise  hotels  on  that  basis. 

Senator  Ferguson.  The  Army  was  trying  to  move  fast  at  that  time. 

The  Acting  Chairman.  How  many  more  appraisers  did  they 
employ  ? 

Mr.  DuPree.  I  don't  know  how  many  more  at  that  time.  It  was 
more  or  less  the  beginning  of  the  whole  process  and  they  were  trying 
to  get  a  system  ironed  out.  Then  they  took  over  a  few  more  hotels 
on  the  basis  of  of  these  appraisals  and  negotiations.  I  don't  think 
they  paid  much  attention  to  my  appraisals,  because  the  price 

Senator  Ferguson  (interposing).  Do  you  have  copies  of  your 
appraisals  ? 

Mr.  DuPree.  I  have  copies  of  most  of  my  appraisals. 

Senator  Ferguson.  Can  you  furnish  them  to  the  committee  ? 

Mr.  DuPree.  I  don't  know  whether  I  am  privileged  to  do  that  or 
not. 

Senator  Ferguson.  Colonel  Knowles? 


8670     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Colonel  Knowles.  The  Army  has  no  objection. 

Mr.  DtjPree.  If  the  Army  has  no  objection  there  is  no  reason  I 
wouldn't  be  willing.  Then  they  took  over  a  few  more  and  then  all 
of  a  sudden 

The  Acting  Chairman  (interposing).  How  were  these  taken  over? 
By  negotiation  ? 

Mr.  DuPree.  Yes,  sir ;  by  negotiation. 

The  Acting  Chairman.  In  other  words  it  was  not  a  commandeering 
nor  a  condemnation,  but  a  negotiation  ? 

Mr.  DuPree.  That  is  right.  They  negotiated  and  they  drove  pretty 
hard  bargains,  from  my  understanding. 

Senator  Ferguson.  Give  us  your  personal  knowledge  of  any  hard 
bargain. 

Mr.  DuPree.  At  that  time — that  particular  time — I  can't  give  you 
any  personal  knowledge,  other  than  what  people  said  to  me. 

The  Acting  Chairman.  You  were  so  busy  appraising  you  didn't 
have  time  ? 

Mr.  DuPree.  I  never  worked  so  hard  in  my  life.  You  know  what 
it  is  running  around  a  hotel  from  top  to  bottom  and  trying  to  estimate 
the  property  and  do  it  on  the  basis  that  before  you  get  back  to  the 
office  he  has  given  you  five  more  to  do.  It's  almost  impossible  and  I 
told  him  it  could  only  be  a  horseback  appraisal,  because  no  one  could 
make  appraisals  like  that.  Then  I  heard  no  more  from  Fitch  and 
then  an  article  appeared  in  the  paper  that  the  Army  was  not  going 
to  take  any  more  leases  or  come  in  with  any  more  men,  because  the 
people  at  Miami  Beach  were  trying  to  hold  up  the  Army.  That  was 
the  Army  release  to  the  papers  and  it  was  pretty  general  at  that  time. 

The  Acting  Chairman.  Can  you  furnish  us  with  any  copies  of  that  ? 

Mr.  Rasco.  Yes,  sir ;  we  can  get  the  copies.1 

Mr.  DuPree.  There  was  a  citizens'  committee  appointed  then  and 
they  negotiated  under  the  citizens'  committee. 

Senator  Ferguson.  Tell  us  some  more  about  that  citizens'  commit- 
tee.    How  was  it  formed?     Who  were  the  members? 

Mr.  DuPree.  There  was  a  group  gotten  together,  supposedly  for 
the  benefit  of  the  Army  and  the  hotel  owners,  and  the  people  who 
wanted  to  lease  their  hotels  were  supposed  to  go  in  and  offer  them  for 
lease,  and  then  the  citizens'  committee  was  supposed  to  do  the  apprais- 
ing and  then  the  negotiators  went  to  work  on  the  people. 

Mr.  Halley.  At  whose  suggestion  was  the  committee  started  ? 

Mr.  DuPree.  I  think  it  more  or  less  started  as  a  result  of  the  adverse 
publicit}7  on  the  adverse  position  of  the  property  owners.  It  put  us  in 
a  bad  light,  because  we  didn't  just  turn  things  over,  and  I  think  a  lot  of 
people  were  more  or  less  frightened  in  that. 

The  Acting  Chairman.  Let  me  ask  you  a  rather  delicate  question 
at  this  point.  Was  there  some  local  pressure,  shall  we  say,  exerted  by 
mercantile  establishments,  fearing  loss  of  trade,  to  get  the  hotel  own- 
ers together  into  this  thing  in  order  that  they  might  get  large  influxes 
of  people  in  for  the  purpose  of  merchandising?  What  I  am  trying 
to  get  at  is  how  the  Army  was  able  to  exert  pressure  on  local  groups. 

Mr.  DuPree.  I  can  give  you  the  answer  to  both  those  questions.  I 
think  there  was  pressure  from  the  merchants  and  from  the  Army. 
In  fact,  the  Army  might  take  a  hotel  on  this  end  of  the  block  and  on 

1  See  Exhibits  Nos.  902,  967,  909,  973-970,  infra,  pp.  9022,  9020,  9028,  and  9058-9089. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8671 

that  end  of  the  block  and  then  put  up  a  "no  trespassing"  sign  and  "no 
driving"  and  the  people  in  the  middle  of  the  block  were  in  an  awful 
condition. 

The  Acting  Chairman.  Do  we  have  any  actual  proof  of  that  ? 

Mr.  DuPree.  Yes,  sir;  we  can  get  people  to  testify  to  that. 

(The  documents  referred  to  were  marked  "Exhibits  Nos.  917  and  918" 
and  are  included  in  the  appendix  on  pp.  8945  and  8946.) 

Senator  Ferguson.  Do  you  think  that  was  deliberate  on  the  part  of 
the  Army  to  block  off  people's  property  so  as  to  compel  them  to  rent  it? 
Do  you  charge  that  ? 

Mr.  DuPree.  I  am  not  making  a  charge  on  that.  I  am  saying  to 
you  that  condition  existed.  The  tenor  of  the  condition  in  those  peo- 
ple's minds  is  beyond  me.  I  don't  know  what  they  had  in  mind,  but  the 
only  thing  I  can  suggest  is  that  that  condition  did  exist  and  I  know 
you  can  find  that  to  be  testified  to  by  numbers  and  numbers  of  people 
down  here,  and  a  lot  of  those  property  owners  figured,  "If  we  don't 
go  and  offer  our  property  to  the  Army  we  won't  do  any  business,  be- 
cause people  can't  get  to  our  property  with  an  automobile  and,  in 
some  instances,  can't  walk  to  it." 

Senator  Ferguson.  Have  you  any  knowledge  as  to  where  they  were 
not  allowed  to  walk  to  their  properties  2 

Mr.  DuPree.  I  have  no  personal  knowledge.  I  couldn't  tell  you 
definitely  which  ones  they  were,  but  my  attention  was  called  to  it  at 
the  time.  I  think  it's  pretty  general  knowledge.  I  am  not  stating  a 
condition  that  is  known  only  to  me.  I  think  that  has  been  admitted 
all  over  the  Beach.  I  think  you  nave  testimony,  too — positive  testi- 
mony— to  that  effect,  haven't  you,  Mr.  Rasco?  I  know  it  is  pretty 
generally  known  and  I  think  the  merchants  exercised  some  power  on 
these  fellows.  I  think  they  said  to  them,  "Listen,  if  the  Army  doesn't 
come  in  here  and  take  these  places  over,  business  may  be  bad.  We 
don't  know."  Everybody  was  panicky  after  Pearl  Harbor.  There 
are  two  sides  to  this  proposition;  but  I  do  think  that  after  this 
situation  went  on  they  took  a  lot  of  hotels  and  they  took  them  on  bases 
that  people  couldn't  pay  out.  Some  of  the  hotels  were  negotiated 
so  cheaply  that  the  people  could  not  pay  their  taxes  and  they  could 
not  pay  their  interest  and  their  insurance,  and  they  couldn't  pay 
their  mortgages  and,  in  many  instances,  there  was  nothing  left  at  all 
for  the  property  owners. 

Senator  Ferguson.  What  is  the  tax  rate  here  in  Miami  Beach  ? 

Mr.  DuPree.  The  tax  rate  is  25  mills  on  about  a  40-percent  valua- 
tion. 

The  Acting  Chairman.  Over  all  ? 

Mr.  DuPree.  Just  Miami  Beach. 

The  Acting  Chairman.  With  additional  county  and  State  taxes. 

Mr.  DuPree.  The  effect  of  taxes  in  Miami  Beach  and  Dade  County 
is  about  2  percent  of  a  fair  value  of  the  piece  of  property. 

The  Acting  Chairman.  That  would  amount  to  2  percent  of  the  fair 
value  ? 

Mr.  DuPree.  Yes,  sir. 

(The  document  referred  to  was  marked  "Exhibit  No.  919"  and  is 
included  in  the  appendix  on  p.  8946.) 

The  Acting  Chairman.  In  these  negotiations  and  appraisals,  were 
these  questions  of,  shall  we  say,  bonded  indebtedness,  taxes,  insurance, 


8672     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

and  things  of  that  kind  taken  into  consideration  and  computed  in  fix- 
ing the  question  of  lease  ? 

Mr.  DttPree.  As  a  rule,  on  the  basis  of  appraisals,  the  basis  that 
most  of  us  fellows  worked  on,  in  the  next  session  of  taking  over,  they 
went  to  the  board  of  realtors  and  we  appraised,  made  an  appraisal  for 
them,  and  the  basis  on  which  we  appraised,  and  the  basis  on  which 
most  of  us  have  always  appraised,  is  an  allowance  of  6  percent  for  the 
fair  value  of  the  land;  6  percent  and  3  percent  for  the  depreciation 
on  the  actual  value  of  the  building;  and  6  percent  interest  with  10 
percent  depreciation  on  furniture,  and  if  there  was  mechanical  equip- 
ment, we  allow  6  percent  interest  and  15  percent  depreciation  on 
mechanical  equipment,  plus  insurance  and  taxes.  That's  the  basis  on 
which  we  said  this  would  be  a  fair  price  for  the  Government  to  pay 
for  this  property. 

Mr.  Halley.  At  the  time  you  were  appraising  for  the  War  De- 
partment, did  you  have  time  to  get  those  figures  and  materials? 

Mr.  DttPree.  At  the  time  I  was  appraising  in  the  hectic  period  I 
was  explaining  to  you,  I  didn't  have  time  to  get  all  that  information. 
I  got  as  much  of  it  as  possible. 

Senator  Ferguson.  Did  you  take  the  owner's  word  as  to  the  value 
of  the  land  and  building  ? 

Mr.  DtjPree.  No,  sir ;  no,  sir.  We  appraised  the  value  of  the  land 
and  equipment  in  this  later  appraisal  we  are  talking  about;  in  the 
previous  appraisals,  in  what  time  we  had,  we'd  give  them  to  our  best 
knowledge  and  information  about  the  same  figure. 

Senator  Ferguson.  Did  the  real-estate  board  later  come  into  the 
picture  and  do  the  appraisal  ? 

Mr.  DuPree.  In  the  last  group  of  hotels  that  were  taken  over  the 
board  of  realtors  furnished  the  appraisers  to  work  with  Major  Fitch, 
or  Colonel  Fitch  I  think  it  is  now,  to  furnish  him  with  appraisals  on 
all  the  properties  he  would  ask  for  appraisals  on. 

Senator  Ferguson.  How  many  were  taken  under  that  basis? 

Mr.  DuPree.  Some  120  or  130  buildings. 

Senator  Ferguson.  And  then  did  the  Government  pay  on  that 
appraisal  ? 

Mr.  DuPree.  I  don't  think  in  any  instance  did  they  pay  as  much 
as  we  recommended.     I  think  it  was  always  a  subject  of  negotiation. 

Senator  Ferguson.  After  the  appraisal  ? 

Mr.  DuPree.  After  the  appraisal.  It  was  a  trading  proposition. 
The  Government  would  trade  with  the  property  owner  and  make  the 
best  deal  possible. 

The  Acting  Chairman.  What  was  the  total  number  of  rooms  taken, 
over-all,  over  the  whole  program  ? 

Mr.  DuPree.  I  should  say — you  mean  apartments  and  hotel  rooms  ? 

The  Acting  Chairman.  That  were  used  for  the  quartering  of  troops, 
not  used  for  officers'  families,  but  for  the  quartering  of  officers  and 
troops  here  for  training. 

Mr.  DuPree.  About  30,000, 1  would  say. 

Mr.  Ward.  Approximately  21,000. 

The  Acting  Chairman.  How  much  do  they  still  retain  of  that,  or 
how  much  has  been  released,  shall  we  say  ? 

Mr.  DuPree.  I  should  say  about  35  percent  of  it  has  been  released. 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8673 

The  Acting  Chairman.  Has  there  been  a  reduction  of  that  much 
in  military  personnel,  or  have  other  accommodations  been  provided? 

Mr.  DuPree.  There  has  been  a  reduction  in  military  personnel; 
nothing  like  as  many  soldiers  in  training  here  now  as  there  were. 

The  Acting  Chairman.  How  long  did  the  peak  period  of  the 
amount  of  personnel  continue? 

Mr.  DuPree.  I  should  say  from  last  fall  until  late  spring,  about 
November  1  until  May  or  June  1. 

The  Acting  Chairman.  Was  there  any  indication  in  this  program 
that  they  were  taking  over  more  space  than  they  actually  had  to  have  ? 
In  other  words,  was  there  any  indication  of  a  mis  judgment  of  re- 
quirements ? 

Mr.  DuPree.  A  lot  of  us  that  had  some  buildings  turned  back  to  us 
wondered  if  they  took  over  enough,  from  the  number  of  people  in 
them  and  the  damage  done  to  them.  In  some  instances  instead  of 
having  three  to  a  room  they  had  four  or  five  to  a  room. 

The  Acting  Chairman.  That  is  customary,  of  course.  What  I  am 
getting  at  is  whether  any  of  this  taking  over  was  an  underestimation 
of  need. 

Mr.  DuPree.  No,  sir.  I  think  the  Army  needed  the  space  at  the 
time  they  took  it. 

The  Acting  Chairman.  They  took  over  the  space  for  utilization  and 
released  it  as  soon  as  the  need  therefor  ceased  ? 

Mr.  DuPree.  I  wouldn't  say  they  released  it  as  soon  because  we 
have  the  condition  that  buildings  have  been  vacant  since  last  Sep- 
tember that  are  just  now  being  released. 

Senator  Ferguson.  In  other  words,  they  held  them  unoccupied 
since  last  September  ? 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  Do  you  know  when  the  building  on  Lincoln  and 
Michigan  was  vacated  ? 

Mr.  DuPree.  Lincoln  and  Michigan? 

Senator  Ferguson.  Yes.  There  is  a  building  there  which  is  held  by 
the  Army ;  there  is  just  a  guard  there  now. 

Mr.  DuPree.  I  don't  know  when  that  was  released. 

Senator  Ferguson.  It  hasn't  been  released,  but  I  want  to  know  when 
it  became  vacant. 

Mr.  DuPree.  I  don't  know  when  it  became  vacant.  That  is  the  old 
Hamilton  Hotel. 

The  Acting  Chairman.  How  many  hotels  and  apartments  are  there 
now  which  have  not  been  released  to  the  owners  and  which  are  not 
being  used  ? 

Mr.  DuPree.  I  think  there  are  quite  a  few  scattered  over  the  beach. 

The  Acting  Chairman.  Would  you  have  any  figures  to  show  that? 

Mr.  DuPree.  No,  sir ;  I  haven't  any  figures. 

Senator  Ferguson.  Do  you  know  whether  or  not  the  owners  are  de- 
manding that  they  get  possession  of  those  properties  or  are  they  satis- 
fied to  let  the  Government  pay  the  rent  and  have  them  unoccupied? 

The  Acting  Chairman.  Or  is  it  a  question  as  to  the  negotiation  on 
contract  cancelation  ? 

Senator  Ferguson.  Can  you  answer  my  question? 

The  Acting  Chairman.  What  is  the  cause  of  holding  these  vacant 
buildings  unoccupied. 


8674     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

Mr.  DuPree.  I  will  say  to  you  this :  Not  to  my  personal  knowledge 
are  any  of  the  hotel  owners  so  anxious  to  get  them  back  at  this  par- 
ticular period  of  the  year,  because  they  probably  wouldn't  be  able  to 
get  them  ready  to  get  income  out  of  them  this  season,  and  the  chances 
are  they  will  have  to  carry  them  vacant  next  summer. 

Senator  Ferguson.  When  they  get  them  back,  can  they  get  priorities 
on  paint,  decorating,  and  material  to  put  them  back  in  condition  ? 

Mr.  DuPree.  I  think  the  engineering  department  will  work  with 
these  people  to  try  to  get  priorities  wherever  possible.  It  is  almost 
impossible  to  get  labor — painters.  You  will  have  to  shop  all  over  town 
to  get  the  paint  you  want.  It  is  hard  to  get ;  it  is  more  expensive  to 
get ;  and  it  is  difficult  to  get  workmen  to  do  the  work  in  a  satisfactory 
manner  and  do  it  quickly,  and  you  pay  twice  as  much  as  you  ever  paid 
before.  You  have  to  pay  bonuses  and  everything  else  to  get  people 
to  work  for  you.  We  have  all  been  through  that  who  have  had  build- 
ings returned,  and  what  I  was  going  to  say  to  you  was  that  in  these 
negotiations  for  hotels  the  Government  said,  "We  will  give  you  so 
much  a  year  for  these  properties,"  and  all  of  us  were  led  to  believe  that 
the  worst  we  could  get  out  of  it  would  be  a  year's  income.  Now  you  can 
see  the  effect. 

Senator  Ferguson.  You  mean  the  worst  or  the  best ? 

Mr.  DuPree.  Anyhow,  they  had  them  for  a  year  off  of  our  hands. 
Now,  they  come  along  and  keep  them  for  6  months  and  give  them  back 
to  you  and  they  keep  them  through  the  winter  season  when  you  have 
a  chance  to  make  money.  Your  taxes  and  interest — interest  and  amor- 
tization— are  on  a  yearly  basis,  and  instead  of  a  year's  rental  they  give 
you  6  months — six-twelfths  of  a  year — or  one-half,  so  we  have  the  situa- 
tion of  a  man  letting  the  Government  use  his  hotel  for  6  months. and 
pay  for  the  privilege. 

Senator  Ferguson.  You  feel,  then,  that  the  Government  should  can- 
cel at  the  end  of  a  year's  period  rather  than  in-between. 

The  Acting  Chairman.  In  other  words,  the  representation  made  at 
the  entrance  of  the  contract  was  that  it  would  be  annual  and  the  rental 
figures  arrived  at  were  based  upon  a  12-month  lease  rather  than  upon 
one  which  might  terminate  at  the  close  of  the  winter  season,  leaving 
you  with  a  dead  season  on  your  hands  ? 

Mr.  DuPree.  That  is  right ;  and  in  no  instances  do  I  know  of  any 
case  where  the  Government  said  to  you,  "We  will  pay  you  so  much 
a  month  for  your  hotel."  They  said  in  all  of  the  negotiations,  "We 
will  pay  you  so  much  a  year." 

Senator  Ferguson.  This  complaint  goes  to  cancelation  rather  than 
the  making  of  the  lease  ? 

Mr.  DuPree.  That  is  right ;  that  is  true ;  and  coupled  together  with 
the  fact  that  they  did  not  pay  a  normal  price  when  they  took  the  hotels. 

The  Acting  Chairman.  That  is  what  we  are  trying  to  get  at — to 
segregate  the  complaints  into  three  classifications.  First,  the  com- 
plaint as  to  a  question  of  contract  cancelation  and  what  is  the  fair  term 
of  cancelation  of  a  contract. 

Mr.  DuPree.  You  see,  gentlemen,  most  of  these  people  wanted  to 
be  of  service.  Most  of  us  have  children  in  the  Army.  We  are  all 
interested  in  helping  the  Government  and  want  to  help  in  every  way 
humanly  possible,  and  we  do  not  feel  that  we  have  done  the  Govern- 
ment any  harm  by  having  three-hundred-and-some-odd  hotels  here 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8675 

t 

available  to  house  the  troops  in  and  we  don't  think  the  Government 
should  take  a  punitive  position  to  punish  these  folks  down  here  because 
they  had  this  property  available,  and  I  think  it  should  be  dealt  with, 
not  at  arm's  length,  but  I  think  we  should  be  dealt  with  as  though  we 
were  real  citizens  of  the  country,  instead  of  taking  the  position  that 
they  want  to  drive  the  hardest  bargain  possible,  and  even  in  the  turning 
back  of  these  properties  there  was  no  spirit  of  negotiating  damages 
in  the  sense  that  I  have  negotiated  damages  with  my  clients.  We  were 
not  permitted,  to  start  with,  to  go  into  these  buildings  with  the  Govern- 
ment negotiators. 

Senator  Ferguson.  Suppose  we  start  with  your  particular  leases. 
You  have  some  leases? 

Mr.  DuPree.  That  is  right. 

MIDTOWN  HOTEL — NEGOTIATIONS  FOR  LEASE  AND  ADJUSTMENT  ON  RELEASE 

BY  ARMY 

Senator  Ferguson.  With  the  Government.  Can  you  give  us,  not 
hearsay,  but  direct  testimony  as  to  your  present  complaint  on  those 
particular  leases  and  give  us  the  names  of  the  buildings? 

Mr.  DuPree.  Take  the  little  Midtown  Hotel. 

(The  document  referred  to  was  marked  "Exhibit  No.  920"  and  is 
included  in  the  appendix  on  p.  8947.) 

Senator  Ferguson.  How  many  rooms? 

Mr.  DuPree.  Thirty-one  rooms. 

Senator  Ferguson.  When  was  it  taken  ? 

Mr.  DuPree.  It  was  taken  in  November  of  1942. 

Senator  Ferguson.  Was  it  appraised  prior  to  taking  ? 

Mr.  DuPree.  It  was  appraised  prior  to  being  taken. 

Senator  Ferguson.  What  was  the  appraisal  ? 

Mr.  DuPree.  That  I  don't  know. 

Senator  Ferguson.  They  didn't  tell  you  that? 

Mr.  DuPree.  They  didn't  tell  me  that. 

Senator  Ferguson.  Tell  us  how  that  was  negotiated. 

Mr.  DuPree.  They  said  the  maximum  they  could  give  was  $5,000 
a  year. 

Mr.  Halley.  With  whom  were  you  negotiating  ? 

Mr.  DuPree.  With  John  Frazure. 

Mr.  Halley.  Who  is  he? 

Mr.  DuPree.  Head  of  the  real-estate  department  for  the  Army 
bureau  here. 

Senator  Ferguson.  An  Army  officer  ? 

Mr.  DuPree.  No,  sir;  a  civilian. 

Senator  Ferguson.  A  local  citizen? 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  He  told  you  all  he  could  give  you  was  $5,000? 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  And  what  did  you  say  ? 

Mr.  DuPree.  I  said,  "If  that  is  all  you  can  give  us  and  the  Govern- 
ment wants  it,  they  can  have  it.  I  think  we  are  entiled  to  more  money, 
but  if  that  is  all  you  are  willing  to  pay,  I  don't  think  it's  enough, 
but" 

Senator  Ferguson.  At  the  present  sitting,  you  say  the  Government 
owes  you  more  than  $5,000  a  year  ? 


8676     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

Mr.  DuPree.  We  had  leased  the  hotel  previously  to  the  Govern- 
ment's taking  it  over  for  $6,975  a  year  and  had  a  year's  rental  secu- 
rity, and  that  was  the  position  of  that  particular  little  property. 

Mr.  Halley.  Mr.  DuPree,  were  any  representations  made  to  you 
by  Mr.  Frazure  concerning  a  maximum  amount  the  Government 
could  pay? 

Mr.  DuPree.  He  said  that  is  all  they  could  give  for  30  rooms. 

Mr.  Halley.  Did  he  say  there  was  a  maximum  number  of  men  to  be 
put  in  a  room  ? 

Mr.  DuPree.  That's  right. 

Mr.  Halley.  What  was  that  number? 

Mr.  DuPree.  He  said  that  in  this  particular  case  they  could  only 
get,  I  think,  60  men. 

Mr.  Halley.  Was  that  based  on  two  in  a  room  ? 

Mr.  DuPree.  That's  my  recollection.  He  said,  "We  can  only  take 
care  of  60  men  in  the  hotel  and  therefore  can  only  pay  $5,000  a  year." 

Mr.  Halley.  Did  he  say  that  was  the  maximum  on  a  per  man  per 
month  per  room  basis  ? 

Mr.  DuPree.  When  they  first  came  down  it  was  one  man  to  every 
600  cubic  feet  of  space. 

Senator  Ferguson.  But  dollars  per  man? 

Mr.  DuPree.  Originally  seven  to  ten  dollars  per  month  per  man 
per  room. 

Mr.  Halley.  Were  you  told  that  by  anybody  representing  the  Gov- 
ernment ? 

Mr.  DuPree.  I  think  that  was  the  first  statement  that  was  made  by 
Lieutenant  Talley,  but  I  am  not  perfectly  clear  on  that. 

Senator  Ferguson.  Where  is  this  building  ? 

Mr.  DuPree.  Just  west  of  Lincoln  Road.  They  kept  the  hotel  from 
November  to  July  and  gave  it  back  and  paid  us  for  8  or  9  months  rent. 

Senator  Ferguson.  You  mean  8  or  9  months,  or  for  the  period  they 
had  it,  in  other  words  ? 

Mr.  DuPree.  They  didn't  pay  us  for  the  period  of  the  rest  of  the 
year. 

Senator  Ferguson.  Was  that  building  rented  to  someone  else  when 
you  gave  it  to  the  Government  ? 

Mr.  DuPree.  It  had  been  rented  to  someone  else. 

Senator  Ferguson.  How  long  before? 

Mr.  DuPree.  Just  a  year  prior  to  the  Government  taking  it  over  it 
had  been  rented  and  we  were  operating  it. 

Senator  Ferguson.  You  were  operating  it  at  the  time? 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  When  you  took  it  back  did  you  make  an  ad- 
justment with  them? 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  And  how  much  did  the  government  pay  you? 

Mr.  DuPree.  The  Government  paid  us  $2,700  for  1  month's  addi- 
tional rental  to  put  it  in  shape  and  the  rest  for  rehabilitation. 

Senator  Ferguson.  How  much  was  the  rental  out  of  the  $2,700? 

Mr.  DuPree.  One  month  would  be  about  $416  rental. 

Senator  Ferguson.  And  they  gave  you,  in  all,  $2,700? 

Mr.  DuPree.  That's  right. 

Senator  Ferguson.  How  did  you  negotiate  that  settlement? 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM     8677 

Mr.  DuPree.  At  first  we  couldn't  go  down  with  their  adjuster  and 
they  offered  me  $700. 

Mr.  Hallet.  What  do  you  mean  you  couldn't  go  down  with  their 
adjuster? 

Mr.  DuPree.  They  called  me  and  said  they  wanted  to  return  the 
property,  and  to  make  an  adjustment. 

Senator  Ferguson.  They  wouldn't  let  you  in  to  see  it  ? 

Mr.  DuPree.  They  said,  "You  can't  take  anybody  with  you.  The 
only  way  you  can  go  is  to  go  with  our  man  and  he  will  tell  you  what 
he  thinks  it  will  cost  to  put  it  back  in  shape." 

Senator  Ferguson.  They  wouldn't  prohibit  you  from  going  in  ? 

Mr.  DuPree.  Not  by  myself. 

Senator  Ferguson.  I  see. 

Mr.  DuPree.  But  not  with  an  appraiser. 

Senator  Ferguson.  But  you  are  an  expert  yourself  ? 

Mr.  DuPree.  I  know  right  much  about  building. 

Senator  Ferguson.  You  could  go  in  with  an  Army  officer  ? 

Mr.  DuPree.  Their  expert.  This  real  estate  project  division  had 
their  own  men  to  go  through  with,  but  they  wouldn't  let  you  go 
through  by  yourself  with  your  own  appraiser. 

Senator  Ferguson.  Did  they  give  you  any  reason  for  that  ? 

Mr.  DuPree.  They  said,  "We  want  to  get  through  real  quick.  We 
are  going  to  pay  cash  and  we  want  this  thing  behind  us,"  so  finally  I 
said,  "That  sounds  awfully  funny  to  me,  but  I  don't  think  anybody 
can  put  anything  over  on  me  so  I'll  go  with  your  men,"  so  I  went  and 
they  offered  me  the  munificent  sum  of  $700  and  I  said,"  I  am  not  even 
mildly  interested  in  $700,"  so  then  they  adjusted  most  all  of  the  others 
and  ours  was  one  of  the  last  ones  and  then  I  got  permission  and  Col- 
onel O'Brien  came  down  and  we  brought  this  question  before  him. 
They  said  first  that  they  hadn't  refused  permission  to  go  in,  and  then 
they  admitted  they  had,  and  they  said  they  had  not  offered  one  sum 
and  later  raised  it  double,  and  I  proved  they  did.  They  admitted  they 
had  and  then  they  permitted  us  to  go  into  the  property  with  our  own 
appraisers.  Then  I  went  in  and  filed  a  claim  that  it  would  cost  $3,600 
or  $3,700  to  put  the  building  in  shape,  and  after  readjusting  it  they 
offered  me  the  settlement  of  $2,700  and  I  accepted  that  and  it  cost  me 
$4,000  to  put  it  in  condition.  So  I  got  $3,600  rent  and  I  got  $2,700  ad- 
justment in  this  little  particular  case  and  this  is  almost  identical  with 
other  people's  cases.  I  paid  $4,000  out  of  that  for  improvements,  re- 
placements, and  I  spent  $1,200  for  taxes  and  insurance,  and  I  spent 
$600  on  the  lawn  additionally,  and  I  paid  the  Government  $1,000  for 
the  privilege  of  letting  them  use  it  for  9  months. 

Senator  Ferguson.  Have  you  any  more  to  say  on  that  particular 
building  ? 

The  Acting  Chairman.  Just  a  minute.  You  said  they  stated  at  the 
outset  the  price  was  based  on  occupancy  of  60  men  in  the  building. 
Have  you  any  actual  knowledge  of  how  many  men  were  in  the  building? 

Mr.  DuPree.  No,  sir;  I  don't;  not  in  that  particular  building. 
That  building  was — well,  you  couldn't  get  in  them  to  count  them.  You 
could  only  count  the  number  of  people  going  in  and  out,  Senator. 

The  Acting  Chairman.  I  see. 

Mr.  Halley.  Before  you  get  to  another  property,  I  want  to  ask  a 
question.    In  the  course  of  your  negotiations,  was  the  30-day  cancela- 


8678     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

tion  clause  mentioned?  While  you  were  negotiating  for  renting  your 
property  did  you  understand  the  30-day  cancelation  clause  was  inserted 
in  your  lease  ? 

Mr.  DuPree.  I  think  all  of  us  understood  that. 

Senator  Ferguson.  To  clear  up  one  point,  you  said  you  were  to  get 
$5,000  for  a  year,  but  they  did  not  actually  keep  it  a  year. 

Mr.  DuPree.  No,  sir. 

Senator  Ferguson.  So  they  paid  you  $3,600  for  the  period  they  did 
keep  it  ? 

Mr.  DuPree.  That's  right ;  $416  a  month,  Senator. 

Senator  Ferguson.  And  they  kept  it 

Mr.  DuPree  (interposing).  Including  the  $400  additional  rental 
they  gave  us  for  the  repair  period,  they  paid  us  a  rent  of  $3,600. 

The  Acttng  Chairman.  And  you  repaired  it  ? 

Mr.  DuPree.  Oh,  yes. 

The  Acting  Chairman.  What  was  the  total  cost  of  repairs? 

Mr.  DuPree.  About  $4,000. 

The  Acting  Chairman.  Was  anything  additional  put  in  there  that 
was  not  put  in  in  the  first  place  ? 

Mr.  DuPree.  No,  sir ;  it's  not  in  as  good  condition  as  it  was  before. 
Another  thing  is  that  I  haven't  told  you  about  that  when  the  Govern- 
ment came  in,  the  people  wanted  the  linens  and  most  of  us  let  the 
Government  have  the  linens.     They  needed  them  for  the  boys. 

The  Acting  Chairman.  Did  you  sell  them  to  them  ? 

Mr.  DuPree.  We  sold  them  to  them  and  let  them  fix  their  price  and 
they  usually  gave  us,  probably,  about  50  percent  of  the  cost  of  the 
linens,  and  when  the  Government  gave  them  back  to  us,  the  blankets 
were  not  usable  and  there  were  no  linens,  of  course.  The  Government 
kept  the  linens  and  we  were  forced  to  go  out  and  pay  about  two  and 
one-half  times  as  much  for  linens  as  we  had  had  to  pay  previously,  and 
above  five  times  what  the  Government  had  given  us  for  our  linens, 
which  we  would  still  have  and  which  would  still  be  usable  if  we  had. 
kept  them. 

Senator  Ferguson.  Is  there  any  price  control  here? 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  And  you  say  you  are  paying  two  and  one-half 
times  as  much  ? 

Mr.  DuPree.  It  must  be  the  ceiling.  We  are  paying  $19  a  dozen  for 
linens  that  we  used  to  pay  about  $8  for.  Of  course,  they  change  the 
name  of  the  brands  and  then  they  can  raise  the  price;  that  is  my 
understanding. 

Senator  Ferguson.  That  is  the  fault  of  the  O.  P.  A. 

Mr.  DuPree.  But  when  people  want  to  pay  for  the  use  of  a  room 
you  don't  go  and  fuss  with  the  O.  P.  A. ;  you  go  and  pay  for  the  linens. 
We  are  placed  in  a  position  where  we  can't  help  ourselves.  So  that  is 
that  side  of  it. 

Now,  on  Mr.  Halley's  question,  when  the  first  leases  were  negotiated 
here,  and  I  am  familiar  with  those  leases,  there  was  no  30-day  clause 
in  any  of  them,  and  then  the  Government  came  back  and  asked  people 
to  take  the  30-day  clause  and  a  great  many  people  did.  I  knew  it  was 
a  30-day  clause  when  I  negotiated. 

Mr.  Halley.  But  some  people  did  not? 

Mr.  DuPp.ee.  I  am  sure  of  that. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8679 

Mr.  Halley.  You  say  you  were  counting  on  getting  at  least  a  year's 
rent.  Did  you  have  any  reason  to  rely  on  getting  a  full  year's  rent 
when  you  signed  the  lease  with  a  30-day  clause  in  it  ? 

Mr.  DtjPree.  Of  course,  we  figured  as  long  as  the  war  was  going  on 
we  were  led  to  believe  that  they  were  going  to  keep  these  places  for 
the  duration. 

Mr.  Hallet.  Were  you  told  anything  by  the  Government  to  make 
you  think  they  were  going  to  keep  them  for  the  duration  ? 

Mr.  DtjPree.  It  was  more  or  less  told  to  all  of  us  that  they  would 
keep  them. 

Mr.  Halley.  When  you  appraised  for  the  Government  were  you  told 
to  use  the  annual  basis  ? 

Mr.  DtjPree.  Only  an  annual  basis ;  no  other  basis  whatever. 

(The  documents  referred  to  were  marked  "Exhibits  Nos.  921  and 
922"  and  are  included  in  the  appendix  on  p.  8948. ) 

Mr.  Hallet.  After  you  signed  your  agreement  for  rental,  did  the 
Government  occupy  your  hotel  fairly  promptly  ? 

Mr.  DtjPree.  After  we  gave  them  permission  to  go  in,  long  before 
we  got  a  lease,  they  were  in  there  before  we  could  get  the  furniture 
out — the  furniture  they  asked  us  to  remove. 

Mr.  Halley.  And  your  lease  came  after  occupancy  by  the  Army? 

Mr.  DtjPree.  In  some  instances  as  much  as  2  months  afterward. 

Mr.  Hallet.  In  your  own  case  ? 

Mr.  DtjPree.  In  our  own  case ;  yes,  sir. 

Mr.  Halley.  Were  there  any  changes  in  conditions  between  the  time 
that  you  agreed  to  rent  and  the  time  you  received  your  lease?  Did 
anything  happen?  Was  there,  for  instance,  a  report  made  on  the 
condition  of  the  hotel  ? 

Mr.  DtjPree.  Yes,  sir.  Sometime,  in  this  particular  case,  about  30 
days  afterward  they  gave  a  report  of  the  condition  of  the  hotels,  and 
reported  all  the  stains  and  every  little  blemish  in  the  hotel. 

Mr.  Halley.  Was  that  report  made  after  the  Army  occupied  the 
hotel? 

Mr.  DtjPree.  The  Army  had  been  in  30  days,  in  most  instances,  or 
sometimes  60  days. 

Mr.  Halley.  Before  they  made  the  report.  Did  you  agree  with 
the  report? 

Mr.  DtjPree.  They  handed  it  to  you  and  said,  "Here  it  is.  You 
might  as  well  accept  it.  You  can't  do  anything  else  about  it."  So 
we  accepted  it. 

Mr.  Halley.  Was  anything  said  about  rent  being  withheld  until  the 
report  was  signed  ? 

Mr.  DtjPree.  Yes,  sir.  There  was  a  statement  made  and  nobody 
got  a  rental  check  until  all  those  conditions  were  met  and  in  some  in- 
stances it  was  5  or  6  months  after  the  army  moved  in  before  people 
got  any  money. 

Mr.  Halley.  Were  you  given  permission  to  go  through  the  hotel 
with  the  people  who  made  the  report  on  the  condition  ? 

Mr.  DtjPree.  No,  sir. 

Mr.  H '  lley.  That  was  handed  to  you  by  the  Army  ? 

Mr.  DtjPree.  That's  right. 

Senator  Ferguson.  But  you  knew  the  condition  of  your  hotel  ? 

Mr.  DtjPree.  Oh,  yes. 


8680     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

Senator  Ferguson.  Was  this  statement  correct  or  false? 

Mr.  DuPree.  Of  course,  we  think  that  there  were 

Senator  Ferguson,   (interposing)  :  On  your  Midtown  Hotel. 

Mr.  DuPree.  On  the  Midtown,  we  think  there  were  a  lot  of  things 
they  claim  were  done  when  they  moved  in  there  that  were  probably 
done  after  they  moved  in  there. 

Senator  Ferguson.  Not  probably;  I  want  to  know  whether  you 
claim  there  was  fraud  by  the  Government. 

Mr.  DuPree.  No,  no ;  I  am  not  accusing  the  Government  of  fraud. 
I  think  they  got  around  as  fast  as  they  could  get  around  to  them,  and 
it  just  so  happened  the  soldiers  had  been  in  these  places  for  30  and 
60  days  and  some  of  the  damage  they  showed  on  the  report  of  condi- 
tion was  not  there  when  they  moved  in. 

Mr.  Halley.  Do  you  know  it  was  not  there  from  your  own  knowl- 
edge? 

Mr.  DuPree.  I  can't  point  out  specific  cigarette  burns,  but  I  am 
confident  in  my  own  mind  it  wasn't  "there. 

Senator  Ferguson.  How  many  rooms  are  there  at  the  Midtown  ? 

Mr.  DuPree.  Thirty-one,  sir. 

Senator  Ferguson.  When  the  Government  came  to  negotiate  with 
you,  how  many  were  occupied  ? 

Mr.  DuPree.  When  they  came  to  negotiate  in  November,  the  hotel 
had  not  been  opened. 

Senator  Ferguson.  The  hotel  was  then  closed  and  would  not  have 
opened  until  when  ? 

Mr.  DuPree.  About  the  first  of  November,  when  the  negotiation  was 
started,  just  before  the  first  of  November. 

Senator  Ferguson.  All  right.  Let's  take  one  of  the  other  buildings. 
Were  any  others  turned  back  to  you  ? 

Mr.  DuPree.  You  are  speaking  of  buildings  that  I  am  interested 
in ;  that  I  manage  or  control  ? 

•Senator  Ferguson.  Either  one ;  hotels  that  you  negotiated  the  leases 
for  and  negotiated  taking  back. 

SURF  AND  SAND  APARTMENTS — ACQUISITION  AND  RELEASE  BY  ARMY 

Mr.  DuPree.  The  Surf  and  Sand  Apartments  at  8845  Collins 
Avenue. 

Senator  Ferguson.  How  many  rooms? 

Mr.  DuPree.  It  has  19  apartments. 

Senator  Ferguson.  When  did  they  take  that? 

Mr.  DuPree.  Sometime  during  November. 

Senator  Ferguson.  The  same  time  that  they  took  the  other.  What 
was  the  rental  on  that  one? 

Mr.  DuPree.  $11,000  a  year 

Senator  Ferguson.  Had  it  been  rented  before? 

Mr.  DuPree.  Oh,  yes. 

Senator  Ferguson.  Was  it  open  at  that  time? 

Mr.  DuPree.  No,  sir. 

Senator  Ferguson.  It  was  not  open  at  that  time? 

Mr.  DuPree.  No,  sir. 

Senator  Ferguson.  Do  you  claim  that  was  or  was  not  a  fair  rental? 

Mr.  DuPree.  I  think  we  should  have  gotten  more,  probably,  for  it, 
and  I  think  we  should  have  had  12  months'  rental. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8681 

Senator  Ferguson.  Has  it  been  turned  back? 

Mr.  DuPree.  It  lias  been  turned  back. 

Senator  Ferguson.  When  was  it  turned  back  ? 

Mr.  DuPree.  Last  July. 

Senator  Ferguson.  So  they  held  that  one  for  some  9  months  ? 

Mr  DuPree.  About  the  same  time ;  yes,  sir. 

Senator  Ferguson.  The  same  period? 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  What  damage  did  they  pay  you  there? 

Mr.  DuPree.  They  paid  us  about  $5,000  for  1  month's  rent  of  $900 
and  $4,300  damages,  approximately. 

Senator  Ferguson.  These  leases,  when  you  negotiated  them,  what 
was  said  about  when  they  turned  them  back  ?  Was  it  reasonable  wear 
and  tear  ?     Was  that  put  in  the  lease  ?     You  are  a  real  estate  operator  ? 

Mr.  DuPree.  The  first  leases  were  predicated  on  civilian  wear ;  the 
first  leases  that  were  negotiated.  A  lot  of  leases,  and  in  the  case  of 
the  Surf  and  Sand,  had  a  clause  that  was  ambiguous.  It  went  ahead 
and  said  the  damages  should  be  adjusted  on  civilian  wear  and  then 
in  the  next  paragraph  it  said  something  about  barracks-room  usage. 

Senator  Ferguson.  Did  it  use  the  word  "civilian"  ? 

Mr.  DuPree.  In  the  first  place,  yes,  sir;  and  in  the  latter  portion 
it  said  something  about  barracks  room  usage,  and  immediately  upon 
their  rehabilitation  they  said,  "We  are  going  to  eliminate  the  question 
of  barracks  room  and  make  this  adjustment  on  civilian  usage." 

Senator  Ferguson.  Did  they  do  that  ? 

Mr.  DuPree.  Well,  they  didn't  give  us  enough  money. 

Senator  Ferguson.  How  much  did  it  cost  you  to  put  that  one  back 
into  shape? 

Mr.  DuPree.  About  $7,500. 

Senator  Ferguson.  Was  that  because  of  the  increase  in  costs  here  in 
Miami  Beach  ? 

Mr.  DuPree.  Partially,  Senator ;  yes.  It  was  also  due  to  conditions 
which  they  said  they  had  nothing  to  do  with.  In  this  particular  prop- 
erty we  had  a  vacant  lot  that  was  grassed  and  pretty,  and  they  tore  it  to 
pieces,  and  to  put  it  back  in  we  had  to  replant  and  put  it  in  condi- 
tion, which  was  an  expense. 

Senator  Ferguson.  Are  you  now  renting  the  Surf  and  Sand  ? 

Mr.  DuPree.  It  is  all  full ;  yes,  sir. 

Senator  Ferguson.  Has  an  O.  P.  A.  ceiling  been  placed  on  it? 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  What  will  be  your  rental  now  ? 

Mr.  DuPree.  $28,800. 

Senator  Ferguson.  That  has  been  approved  by  O.  P.  A.  ? 

Mr.  DuPree.  Yes,  sir ;  and  that  is  about  $3,000  less  than  we  got  when 
the  Government  took  it. 

Senator  Ferguson.  But  it  has  been  approved  by  O.  P.  A.  ? 

Mr.  DuPree.  Yes,  sir ;  yes,  sir. 

Senator  Ferguson.  On  this  hotel  and  apartment,  did  you  request 
them  to  be  returned  or  why  were  thev  turned  back  while  others  were 
not? 

Mr.  DuPree.  They  were  all  turned  back  in  that  particular  area. 

Senator  Ferguson.  So  there  has  been  no  turning  back  of  one  and 
keeping  of  another.     They  have  all  been  turned  back  in  that  area  ? 

311932— 44— pt.  21 12 


8682     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Mr.  DuPree.  They  have,  except  one,  all  been  turned  back  in  that 
area.  I  think  there  is  one  hotel  there.  But  everything  up  on  Surfside 
was  returned. 

Senator  Ferguson.  Do  you  claim  the  Government  has  shown  favor- 
itism in  turning  back? 

Mr.  DuPree.  No,  sir ;  I  haven't  made  any  statement  of  that  kind. 

Senator  Ferguson.  You  don't  claim  that  to  be  a  fact  ? 

Mr.  DuPree.  No,  sir ;  I  think  the  Government  has  shown  bad  timing 
in  turning  back  some  of  these  properties  that  have  been  vacant  since 
last  September.  They  could  have  given  them  to  people  in  time  to  get 
them  ready  and  relieve  some  of  this  housing  shortage  here. 

Senator  Ferguson.  But  you  don't  claim  any  favoritism  ? 

Mr.  DuPree.  None  that  I  know  of. 

Senator  Ferguson.  Have  any  other  of  your  properties  been  turned 
back? 

ARMY  ACQUISITION  OF  HOTELS  IN  MIAMI 

Mr.  DuPree.  The  only  other  property  that  we  manage  that  we  have 
charge  of  is  the  Peter  Miller  Apartments,  which  was  the  first  of  all  of 
the  apartments  turned  back  last  February  right  in  the  middle  of  the 
season,  and  we  were  glad  to  get  it  back.  We  were  kind  of  given  a  rush 
act  on  that.  They  wanted  us  to  accept  six  or  seven  hundred  dollars  for 
repairs  and  damages.  That  was  occupied  not  by  enlisted  men ;  it  was 
occupied  and  rented  to  Army  officers,  and  they  offered  us,  I  think, 
seven  or  eight  hundred  dollars  for  the  repairs  of  that  property.  One 
of  the  men  in  the  Army  office  down  here  said  they  had  to  get  very  quick 
action  and  that  I  had  to  make  up  my  mind  very  quickly  on  what  we 
were  going  to  do,  although  there  were  numbers  of  people  who  wanted 
to  rent  these  apartments  and  we  had  a  tremendous  shortage.  Finally 
I  got  Colonel  Fitch  over  and  Colonel  Proctor,  and  they,  and  they  made 
a  concession  of  about  three  times — two  and  a  half  times — the  amount 
they  originally  offered,  and  the  urgency  of  the  thing  was  so  great  that 
we  had  to  accept  the  settlement  so  we  could  get  them  back.  They 
would  not  release  us  on  them,  and  we  had  people  standing  on  the  door- 
step who  wanted  to  get  in  to  live  in  the  apartments.  That  was  last 
February.  That  was  February  a  year  ago,  so  we  accepted  most  any- 
thing they  would  give  us,  but  we  are  not  complaining  about  that  par- 
ticular property. 

Senator  Ferguson.  "Would  you  say  now,  to  get  some  hearsay  as  they 
call  it  in  law,  that  your  experience  has  been  what  other  people's  experi- 
ence has  been,  so  as  to  cover  generally  all  the  property? 

Mr.  DuPree,.  I  think  it  is  more  or  less  general  all  over  the  beach, 
Senator.  I  think  my  experience  has  not  been  different.  I  think  you 
will  find  the  other  fellows  testifying  here 

Senator  Ferguson  (interposing) .  You  think  a  man  who  is  not  a  real- 
estate  broker  and  does  not  know  as  much  about  it  as  you  would  be 
treated  as  you  were  treated? 

Mr.  DuPree.  The  idea  was,  I  think,  that  they  were  driving  the  bar- 
gains and  dealing  with  all  these  people  down  here  at  arm's  length. 
They  made  the  best  deal  possible  without  any  idea  or  desire  of  uni- 
form methods  of  procedure,  and  I  have  an  idea  that  if  they  made  an 
especially  good  deal  they  bragged  about  it  to  their  superior  officers  and 
the  thought  in  my  mind  was  that  it  is  pretty  general  all  over  the  beach. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8683 

Senator  Ferguson.  You  do  not  claim  that  promotions  were  made  by 
good  deals,  do  you  ? 

Mr.  DuPree.  Well,  Senator,  I  don't  want  to  go  out  on  a  limb  in  that 
respect,  but  I  have  my  ideas. 

Senator  Ferguson.  I  am  asking  for  hearsay.  Do  you  think  that  is 
true  ?     Do  you  sincerely  think  that  is  true  ? 

Mr.  DuPree.  One  of  these  men  was  promoted  from  captain  to 
colonel  in  a  very  short  period  of  time  because  of  his  activities. 

Senator  Ferguson.  You  think  that  was  because  of  his  good  bar- 
gains ? 

Mr.  DuPree.  I  have  my  serious  thought  that  that  had  a  lot  to  do 
with  it. 

Mr.  Halley.  Were  any  of  the  properties  in  Miami  Beach  condemned 
in  court  proceedings  ? 

Mr.  DuPree.  No,  sir ;  I  don't  think  but  one  condemnation  suit  was 
filed  and  that  was  against  the  Governor  Hotel,  yes ;  and  the  Sovereign 
Hotel. 

Mr.  Halley.  How  were  they  disposed  ? 

Mr.  DuPree.  I  think  the  condemnation  proceedings  were  elimi- 
nated and  they  then  made  an  agreement  with  the  Government. 

Mr.  Halley.  Was  any  pressure  brought  to  bear  on  hotel  owners  to 
avoid  condemnation  proceedings? 

Mr.  DuPree.  Well,  we  got  the  whole  story  to  the  effect  that  these 
men  were  coming  in  there.  They  needed  accommodations  for  them. 
"It  is  your  patriotic  duty  to  do  it,"  they  said,  and  I  think  the  people 
felt  it  was  their  patriotic  duty.  I  don't  think  they  needed  so  much 
pressure.     I  think  these  people  wanted  to  accommodate  them. 

Mr.  Halley.  As  a  real-estate  expert,  do  you  know  why  the  Navy 
was  able  in  Miami  Beach  to  condemn  its  properties  and  the  Army  did 
not  condemn  any  properties  except  two  ?     Do  you  know  the  reasons  ? 

Mr.  DuPree.  The  Navy  works  differently.  I  think  the  Navy  goes 
in  and  files  condemnation  proceedings.  I  don't  think  they  try  to 
negotiate. 

Senator  Ferguson.  Did  this  citizens'  group,  formed  in  Miami  Beach, 
attempt  to  avoid  condemnation  proceedings?  Was  there  a  feeling 
that  over  here  you  didn't  want  to  have  the  Government  go  through 
court  and  you  didn't  want  to  go  through  court ;  that  one  of  the  pur- 
poses of  this  organization  of  civilians  was  to  eliminate  that  ?  Is  that 
true? 

Mr.  DuPree.  I  think  it  was  largely  the  reason  that  the  committee 
was  formed,  to  help  the  Army  obtain  accommodations  amicably,  with 
out  condemnation,  and  I  think  they  all  worked  with  that  idea  in  view. 

Senator  Ferguson.  You  also,  then,  would  consider  there  would  not 
be  any  necessity  to  have  a  lawyer  if  you  had  no  condemnation  pro- 
ceedings ? 

Mr.  DuPree.  That  is  right.  You  wouldn't  have  to  have  a  lawyer 
or  the  expense  of  it. 

Senator  Ferguson.  Were  there  any  commissions  paid,  to  your 
knowledge  ? 

Mr.  DuPree.  Not  to  my  knowledge. 

Senator  Ferguson.  It  was  negotiated  without  paying  commissions 
for  leasing? 


8684     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

Mr.  DuPree.  I  don't  know  anyone  that  made  any  money  on  it 
whatsoever.    Not  even  by  hearsay  do  I  know  that. 

Senator  Ferguson.  Do  you  know  of  any  claim  of  corruption  or 
graft  or  anything  in  connection  with  these  leases  ? 

Mr.  DuPree.  No,  sir. 

Senator  Ferguson.  Do  you  claim  any  ? 

Mr.  DuPree.  No,  sir ;  I  know  of  none. 

Senator  Ferguson.  And  you  know  of  no  claim  that  was  true  ? 

Mr.  DuPree.  No,  sir;  I  don't  believe  there  was  any. 

Senator  Ferguson.  And  you  don't  claim  there  was  graft  or  corrup- 
tion in  getting  them  back ;  that  people  are  paying  to  get  them  back  ? 

Mr.  DuPree.  I  don't  think  there  is  any  question  of  corruption  or 
graft  in  the  turning  back  of  these  properties.  I  do  say  that  they  have 
driven  some  very  hard  bargains  and  that  the  people  who  owned  the 
properties  here  have  suffered  and  I  don't  think  they  got  as  much  for 
the  rehabilitation  as  they  should  have  gotten.  I  don't  think  they 
got  as  much  as  they  should  have  gotten  in  the  negotiation  of  the  leases 
originally,  and  I  don't  think  they  should  keep  them  for  8  months,  using 
them  for  the  8  good  months  of  the  year,  and  then  turn  them  back 
for  the  4  unproductive  months. 

Senator  Ferguson.  When  would  you  say  would  be  the  appropriate 
time  for  the  Army  to  turn  them  back  so  as  to  avoid  loss  by  the 
owners  ? 

Mr.  DuPree.  I  think  they  should  turn  them  back  in  July  and  pay 
up  to  the  1st  of  January  for  a  full  year. 

Senator  Ferguson.  In  other  words,  if  they  leased  them  between 
January  and  May 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  Wouldn't  they  have  a  proper  right  to  turn  them 
back  in  May,  at  the  end  of  the  season  ? 

Mr.  DuPree.  If  they  kept  them  the  first  of  the  year  to  the  end 
of  the  season  and  turned  them  back  and  paid  for  the  whole  year? 
that  would  be  the  ideal  situation. 

Senator  Ferguson.  If  they  turned  them  back  in  July,  that  is  nor- 
mally the  dullest  season  in  Miami  Beach  ? 

Mr.  DuPree.  That  is  the  dullest  season. 

Senator  Ferguson.  And  the  rental  could  be  adjusted  as  of  that 
time? 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  If  you  had  them  back  for  rental,  say,  until  No- 
vember, you  would  say  that  would  be  fair  ? 

Mr.  DuPree.  Yes,  sir ;  I  would  say  very  fair. 

Senator  Ferguson.  The  Government  has  attempted  to  do  that? 

Mr.  DuPree.  No,  sir. 

Senator  Ferguson.  They  have  not  attempted  to  do  that? 

Mr.  DuPree.  No,  sir. 

Senator  Ferguson.  Has  a  committee  been  formed  to  negotiate  the 
matter  with  the  Government? 

Mr.  DuPree.  We  tried  to  form  such  a  committee.  We  asked  that  they 
allow  a  committee  to  be  formed  to  work  with  the  Government  on  the 
rehabilitation. 

Senator  Ferguson.  What  has  been  done  with  that  committee? 

Mr.  DuPree.  Colonel  O'Brien  told  us  when  he  was  down  here  that 
he  would  not  agree  to  that. 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM     8685 

Senator  Ferguson.  Did  lie  give  a  reason  ? 

Mr.  DuPree.  We  didn't  get  many  reasons  out  of  the  Army,  Senator. 
They  would  grant  certain  privileges,  and  beyond  that  we  couldn't  get 
any  excuse  or  reason. 

Senator  Ferguson.  But  they  did  cooperate  with  the  committee  in 
leasing  ? 

Mr.  DuPree.  They  did  ask  that  a  committee  do  the  appraisal  work 
for  them,  but  they  never  told  the  committee  what  they  paid  for  the 
properties.  That  is,  they  never  told  the  committee  what  they  paid  for 
the  properties  they  appraised,  and  they  never  let  the  committee  know 
what  had  happened  in  any  case,  and  the  only  way  we  were  able  to 
find  out  what  they  offered  for  the  properties  we  appraised  was  from 
the  people  who  leased  to  the  Government  their  properties. 

Senator  Ferguson.  Did  the  owners  know  what  your  appraisals  were  ? 

Mr.  DuPree.  That  we  have  never  been  able  to  find  out.  They  did 
not  know  from  us.    We  were  supposed  to  keep  it  very  secret. 

Senator  Ferguson.  You  were  under  secrecy  ? 

Mr.  DuPree.  Yes,  sir. 

Senator  Ferguson.  So  you  don't  know  whether  the  owner  knew 
what  the  appraisal  was. 

Mr.  Halley.  Were  you  told  that  these  prices  were  military  secrets  ? 
Was  that  phrase  used  ? 

Mr.  DuPree.  I  don't  think  so. 

Mr.  Halley.  Not  to  you?- 

Mr.  DuPree.  Not  to  me. 

Senator  Ferguson.  But  you  were  working  for  the  Government  ? 

Mr.  DuPree.  We  were  working  under  the  Real  Estate  Procurement 
Office,  headed  by  John  Frazure  and  Colonel  Fitch. 

Senator  Ferguson.  When  this  board  of  realtors,  or  this  citizens' 
committee,  was  formed,  were  they  appraising  under  secrecy  also  ? 

Mr.  DuPree.  We  were  told  we  were  not  to  divulge  that  except  to 
the  Real  Estate  Procurement  Office  of  the  Army. 

The  Acting  Chairman.  All  right,  Mr.  DuPree.  Thank  you  very 
much. 

For  the  benefit  of  the  people  from  out  of  town,  from  St.  Petersburg 
and  Daytona  Beach,  we  are  going  to  give  them  a  chance  to  get  their 
evidence  in  and  get  home.  I  understand  they  have  representatives 
here.     Is  Mr.  Henry  W.  Haynes  here  ? 

Mr.  Haynes.  Yes. 

The  Acting  Chairman.  Do  you  swear  the  evidence  you  give  in  the 
matter  now  in  hearing  shall  be  the  truth,  the  whole  truth,  and  nothing 
but  the  truth,  so  help  you  God  ? 

Mr.  Haynes.  I  do. 

TESTIMONY  OF  HENEY  W.  HAYNES,  OWNEE,  PEINCESS  ISSENA 
HOTEL,  DAYTONA  BEACH,  ELA. 

ARMY  ACQUISITION  OF  HOTELS  IN  DAYTONA  BEACH 

The  Acting  Chairman.  For  the  benefit  of  the  record,  will  you  state 
your  name? 

Mr.  Haynes.  My  name  is  Henry  W.  Haynes.  I  am  the  owner  of  the 
Princess  Issena  Hotel  in  Daytona  Beach. 


8686     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

The  Acting  Chairman.  You  also  own  or  operate  the  White  Face 
Inn  at  Lake  Placid  ? 

Mr.  Haynes.  Yes,  sir. 

The  Acting  Chairman.  In  other  words,  you  operate  a  summer  hotel 
in  the  north  and  a  winter  hotel  in  the  south. 

Mr.  Haynes.  Yes;  and  the  Issena  and  the  White  Face  are  parts  of 
that  arrangement,  but  not  one  company.  I  own  the  Princess  Issena 
and  I  am  part  owner  of  the  White  Face  Inn,  but  I  operate  both. 

Mr.  Halley.  But  you  do  operate  the  Princess  Issena  at  Daytona 
during  the  summer  season  ? 

Mr.  Haynes.  It  has  never  been  operated  between  the  1st  of  May  and 
the  1st  of  December. 

Mr.  Halley.  Before  getting  into  your  own  personal  situation,  will 
you  state  whether  or  not  you  are  the  only  representative  of  Daytona 
Beach  who  is  here  ? 

Mr.  Haynes.  I  am.  I  tried  to  get  several  of  the  others,  but  several 
of  the  other  larger  hotels  have  not  been  given  back  yet,  so  they  haven't 
had  a  settlement,  and  some  of  the  smaller  men  were  staying  to  take 
care  of  business  and  others  were  worrying  about  transportation. 

Mr.  Halley.  Can  you  state  generally,  before  going  into  your  own 
situation,  what  the  facts  are  with  reference  to  Daytona  Beach?  Did 
the  Army  take  over  a  large  number  of  hotels  ? 

Mr.  Haynes.  Yes.  Of  course,  there  are  not  too  many  hotels  in 
Daytona  Beach.  There  are  two  large  ones  in  Daytona,  the  Clarendon 
and  the  Princess  Issena.    Mine  has  the  greater  accommodations. 

Mr.  Halley.  The  Clarendon  is  still  taken  over  ? 

Mr.  Haynes.  That  is  right. 

Mr.  Halley.  There  are  a  number  of  smaller  hotels  at  Daytona 
Beach? 

Mr.  Haynes.  Yes,  sir. 

Mr.  Halley.  Do  you  know  roughly  how  many  ? 

Mr.  Haynes.  About  40. 

Mr.  Halley.  That  were  taken  over  by  the  Army  ? 

Mr.  Haynes.  Yes,  sir.     I  mean  from  20  to  35  rooms. 

The  Acting  Chairman.  What  is  the  size  of  the  Princess  Issena  ? 

Mr.  Haynes.  It  occupies  a  city  block.  There  is  a  main  hotel  of  135 
rooms,  15  cottages,  and  a  small  inn  of  31  rooms — the  total  capacity  is 
225  rooms,  with  a  guest  capacity  of  around  300,  although  I  understand 
they  had  as  high  as  800  at  one  time  in  there. 

The  Acting  Chatrman.  What  is  the  size  of  the  Clarendon? 

Mr.  Haynes.  I  should  say  a  guest  capacity  of  230  or  240. 

The  Acting  Chairman.  What  is  the  total  hotel  capacity  of  Daytona 

Beach  ?    It  would  have  to  be  an  estimate,  I  realize  that.    And  I  mean 

■  as  differentiated  from  apartment  houses.    I  mean  hotel  capacity  only. 

Mr.  Haynes.  I  doubt  if  there  are  over  1,000  or  1,200  rooms. 

The  A  cttng  Chairman.  I  see.  What  percentage  did  the  Army  take 
over  of  that  number  ? 

Mr.  Haynes.  Well,  the  Army  took  over,  I  should  say,  75  percent. 

The  Acting  Chairman.  Seventy-five  percent? 

Mr.  Haynes.  Yes,  sir. 

The  Acting  Chairman.  Was  that  air  force? 

Mr.  Haynes.  That  was  WAC. 

Mr.  Haliey.  With  reference  to  your  own  hotel,  will  you  state  to  the 
committee  what  your  experience  was  on  the  renting  of  the  hotel? 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8687 

Mr.  Haynes.  I  was  at  Lake  Placid  and  Major  Fitch  called  me  on  the 
telephone  and  told  me  that  they  were  trying  to  start  there,  and  that 
mine,  being  the  largest  capacity,  he  wanted  to  deal  with  me  first. 

Mr.  Halley.  Were  you  seeking  to  rent  ? 

Mr.  Hatnes.  No,  sir ;  I  at  no  time  wanted  to  rent. 

Mr.  Halley.  Had  you  actively  opposed  renting  ? 

Mr.  Haynes.  Yes,  sir ;  there  had  been  a  meeting  in  the  Chamber  of 
Commerce  that  May  when  a  number  of  hotel  men  had  been  there  and  I 
didn't  want  to  rent. 

Mr.  Halley.  Many  others  wanted  to  rent,  however  ? 

Mr.  Haynes.  I  was  practically  the  only  one  other. 

PEINCESS  ISSENA  HOTEL,  DAYTONA  BEACH ARMY  NEGOTIATIONS  FOR  LEASE 

Mr.  Halley.  Go  ahead  with  your  statement. 

Mr.  Haynes.  Major  Fitch  called  me  and  we  discussed  the  thing  for 
about  an  hour. 

Senator  Ferguson.  You  mean  on  the  telephone  for  an  hour  ? 

Mr.  Haynes.  Yes,  sir ;  yes,  sir.  So  finally  I  said,  "Well,  just  what  is 
the  story?"  I  said,  "What  are  you  going  to  pay  for  the  property?" 
He  said,  "$33,000  a  year."  I  said,  "Major,  you  can  check  my  income 
tax.  That  doesn't  take  care  of  my  fixed  charges  without  any  interest  on 
my  money."  He  said,  "Well,  that's  all  We  can  pay."  I  said,  "How  do 
you  arrive  at  that?"  He  said,  "That's  a  military  secret."  So  I  said, 
"Well,  Major " 

The  Acting  Chairman  (interposing).  Was  that  said  facetiously? 

Senator  Ferguson.  Did  you  believe  him  when  he  told  you  that  ? 

Mr.  Haynes.  Yes,  naturally. 

Mr.  Halley.  Were  you  able  to  get  the  figures  from  him  ? 

Mr.  Haynes.  $33,000. 

Mr.  Halley.  No  ;  I  mean  the  components,  the  basis  for  the  figure. 

Mr.  Haynes.  No,  no. 

Senator  Ferguson.  You  took  it  for  granted  that  he  was  telling  you 
correctly ;  that  it  was  a  military  secret  ? 

Mr.  Haynes.  That's  right ;  and  I  told  him  my  fixed  charges  and  my 
taxes,  and  he  said  he  knew  about  those,  and  he  said  he  would  call  me 
again  the  next  day.  At  both  of  these  conversations  nothing  was  said 
except  on  a  yearly  basis  of  $33,000  a  year.  Well,  living  in  a  small  city, 
naturally  I  knew  that  if  I  turned  this  thing  down  and  Daytona  lost 
getting  these  WAC's  there,  the  businessmen  weren't  doing  any  business. 

Senator  Ferguson.  And  you  being  the  lone  man  to  stop  it  ? 

Mr.  Haynes.  I  knew  I  might  as  well  not  come  back  to  Daytona 
Beach. 

Mr.  Halley.  Were  you  told  if  you  did  not  rent  that  the  Government 
would  not  go  into  Daytona  Beach  ? 

Mr.  Haynes.  No  ;  but  he  said  mine  was  the  largest  property  there, 
and  that  had  a  good  deal  to  do  with  it. 

Senator  Ferguson.  Was  business  bad  then  in  Daytona  Beach  ? 

Mr.  Haynes.  I  wasn't  there,  sir. 

Senator  Ferguson.  What  did  you  hear  ? 

Mr.  Haynes.  Business  was  bad  among  the  merchants. 

Senator  Ferguson.  There  was  no  business? 

The  Acting  Chairman.  Was  there  a  lot  of  pressure  among  the  mer- 
chants to  get  the  hotels  rented  ? 


8688     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Mr.  Hatnes.  I  think  there  is  no  question.  I  think  they  sent  a  dele- 
gation to  Washington  to  get  some  form  of  the  military  there. 

The  Acting  Chairman.  Was  that  participated  in  actively  by  the 
hotel  owners  ? 

Mr.  Hatnes.  That  I  don't  know.  I  had  been  away  since  the  1st  of 
May  of  that  year. 

The  Acting  Chairman.  You  said  fixed  charges  on  this  $33,000. 
What  items  do  you  include  as  fixed  charges  ? 

Mr.  Hatnes.  Taxes,  insurance,  depreciation,  and  maintenance — nor- 
mal maintenance. 

The  Acting  Chairman.  It  had  nothing  to  do  with  guest  occupancy  ? 

Mr.  Hatnes.  Oh,  no,  no. 

The  Acting  Chairman.  Simply  what  it  would  cost  you  to  maintain 
that  hotel  in  its  condition  if  there  were  no  guests  there  ? 

Mr.  Hatnes.  That's  right ;  and  that's  without  interest  on  the  money, 
because  there  isn't  any  mortgage  on  the  property.  I  did  understand 
at  Daytona  that  people  who  had  mortgages  on  their  property  received 
more  consideration  than  we  who  didn't ;  but,  at  any  rate,  he  called  back 
the  next  day  and,  as  I  said,  I  knew  there  was  no  use  for  me  to  go  back 
to  Daytona  unless  I  accepted. 

Senator  Ferguson.  You  don't  claim  that  was  Major  Fitch's  fault? 

Mr.  Hatnes.  What,  sir  ? 

Senator  Ferguson.  It  was  not  on  account  of  him  that  you  couldn't 
go  back,  but  it  would  be  because  of  the  merchants  ? 

Mr.  Hatnes.  Oh,  no,  no;  public  opinion.  They  thought  it  was 
a  good  thing.     It  was  a  matter  of  difference  of  opinion. 

The  Acting  Chairman.  Did  you  give  him  the  items  of  your  fixed 
charges  when  you  talked  to  him  on  the  telephone? 

Mr.  Hatnes.  Yes,  sir.  He  said  he  knew  those.  My  taxes  run 
anywhere  from  $14,000  to  $17,000  a  year.  My  depreciation  is  any- 
where from  $20,000  to  $25,000  a  year.  I  have  spent  on  maintenance 
over  the  past  10  years  an  average  of  $8,000  a  year.  Insurance  will 
run  anywhere  from — 3-vear  policies — $1,200  to  $3,000  a  year;  about 
$45,000,000. 

Senator  Ferguson.  What  did  he  say  about  that? 

The  Acting  Chairman.  When  you  say  "depreciation,"  you  mean 
normal  depreciation  with  care? 

Mr.  Hatnes.  I  mean  depreciation  allowable  on  your  income  tax. 

Mr.  Hallet.  You  can  take  the  $8,000  for  maintenance  out  if  the 
Army  were  going  to  occupy  and  maintain  the  property  ? 

Mr.  Hatnes.  In  their  lease  they  didn't  maintain  the  exterior.  Roofs 
and  exterior  would  have  to  be  maintained  by  the  owner. 

Mr.  Hallet.  What  would  you  consider  the  annual  cost  of  main- 
taining the  exterior? 

Mr.  Hatnes.  That  is  a  pretty  hard  thing  to  say,  because  I  have 
taken  care  of  my  maintenance  as  a  whole.  Say  anyway  not  less  than 
$2,500  a  year. 

Mr.  Hallet.  Is  the  figure  you  have  given  with  respect  to  deprecia- 
tion a  figure  that  has  been  allowed  in  the  past  years  by  the  income- 
tax  authorities? 

Mr.  Hatnes.  For  many  years.     They  revised  it  4  or  5  years  ago 
and  cut  it  down,  so  I  know  it's  about 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8689 

Senator  Ferguson  (interposing).  What  was  your  percentage  of 
depreciation  used  in  the  income  tax  ? 

Mr.  Haynes.  One  of  the  buildings,  2y2  percent;  furniture  and  fix- 
tures, 10  percent ;  machinery  and  laundry,  10  percent. 

Senator  Ferguson.  Was  the  Government  going  to  take  your  ma- 
chinery and  laundry  ? 

Mr.  Haynes.  They  did,  sir. 

Senator  Ferguson.  And  the  furniture? 

Mr.  Haynes.  They  didn't  take  all  the  furniture ;  they  specified  what 
they  wanted. 

Senator  Ferguson.  And  you  knew  it  was  to  be  occupied  by  WAC's? 

Mr.  Haynes.  Yes,  sir. 

Senator  Ferguson.  Have  you  got  the  property  back  yet? 

Mr.  Haynes.  Yes,  sir. 

Senator  Ferguson.  What  condition  did  you  get  it  back  in  ? 

Mr.  Haynes.  Naturally,  with  anywhere  from  four  to  eight  hun- 
dred women  it  showed  a  great  deal  of  wear  and  tear. 

Senator  Ferguson.  Any  more  than  if  they  had  been  civilians  ? 

Mr.  Haynes.  Oh,  yes,  by  far ;  certainly,  certainly. 

Senator  Ferguson.  What  allowance  did  the  Government  give  you  ? 

Mr.  Haynes.  The  Government  gave  me  an  allowance  which  I  think 
will  pay  about  two-thirds  of  what  it  is  going  to  cost  me  to  put  it 
back  in  shape. 

Senator  Ferguson.  When  did  you  discover  it  was  two-thirds? 

Mr.  Haynes.  When  I  accepted  it. 

Senator  Ferguson.  Why  did  you  accept  it  ? 

Mr.  Haynes.  Because  I  was  told  at  the  time  I  accepted  it  that  an 
amount  of  more — in  other  words,  I  asked  them  about  $13,500.  They 
told  me  that  an}^  amount  over  $10,000  would  have  to  go  before  Con- 
gress to  be  settled. 

Senator  Ferguson.  Who  told  you  that  ? 

Mr.  Haynes.  I  think  Mr.  Spooner  was  in  the  room. 

The  Acting  Chairman.  What  representative  of  the  Army  told 
you  that  ? 

Mr.  Haynes.  Three  men.  There  was  a  Major  Hancock,  a  Mr.  Busby, 
who  has  since  died,  and  a  Mr.  Spooner,  who  is  in  the  room  now. 

The  Acting  Chairman.  Is  Mr.  Spooner  in  uniform  ? 

Mr.  Haynes.  No,  sir. 

Senator  Ferguson.  He  was  working  for  the  Army  ? 

Mr.'  Haynes.  Yes,  sir. 

Senator  Ferguson.  They  all  told  you  if  they  gave  you  more  than 
$10,000 

Mr.  Haynes  (interposing).  I  can't  say  which  one,  but  the  three  of 
them  were  in  the  room  when  it  was  told  to  me. 

The  Acting  Chairman.  That  they'd  have  to  get  a  bill  through 
Congress  to  pay  more  than  $10,000  ? 

Mr.  Haynes.  Yes,  sir. 

The  Acting  Chairman.  Go  ahead. 

Mr.  Haynes.  My  complaint  isn't  on  that.  Rather  than  to  hire 
lawyers  and  all  that 

Senator  Ferguson  (interposing).  It  wasn't  the  matter  that  you 
had  to  go  to  Congress  that  made  you  settle  ? 


8690     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Mr.  Haynes.  Certainly  it  was.  I  needed  the  money,  sir.  I  had  to 
put  the  place  in  shape.  That  part  I  am  not  kicking  about.  My  com- 
plaint is  that  they  based  a  year's  rent  on  a  year's  cost  and  they  used 
my  property  only  part  of  the  year,  the  part  of  the  year  that  I  could 
use  it  to  get  those  costs,  and  they  are  actually  paying  me  in  dollars  for 
6  months  in  1943  and  1  month  in  1942.  The  6  months  in  1943  would 
be  $16,500.  My  taxes  and  insurance  will  be  more  than  that  without 
a  cent  of  depreciation  or  interest  on  my  money. 

The  Acting  Chairman.  When  did  they  take  it  over  in  1942? 

Mr.  Haynes.  They  took  it  over  the  1st  of  December  1942. 

The  Acting  Chairman.  I  have  an  operating  statement  for  the  year 
1942  which  shows  a  gross  income  from  the  hotel  of  $84,619.21  and  an 
operating  expense  of  $58,618.18.  That  is  for  that  period  of  time, 
for  the  time  they  took  it  over  ? 

Mr.  Haynes.  That  is  for  the  period  up  to  the  time  they  took  it  over. 

The  Acting  Chairman.  Which  was  just  the  beginning  of  your 
season. 

Mr.  Haynes.  This  is  a  copy  of  the  figures  we  furnished  for  income 
tax.  The  hotel  showed  a  net  profit  in  1942  of  $5,188,  after  $21,253 
depreciation  had  been  taken.    That  is  what  I  paid  income  tax  on. 

The  Acting  Chairman.  You  had  a  gross  profit  of  over  $26,000 
and  taking  out  depreciation  left  you  a  net  profit  of  some  $5.0000. 

Mr.  Haynes.  Which  is  the  poorest  year  in  the  29  years  I  have  run 
the  place. 

The  Acting  Chairman.  I  note  from  another  statement  that  in 
1941  you  had  receipts  of  $132,020.87  as  against  operating  expense 
of  $86,876.72.  That  was  for  the  12-month  period,  the  calendar  year ; 
was  it  ? 

Mr.  Haynes.  That's  right. 

The  Acting  Chairman.  That  showed  a  profit  there  of 

Mr.  Haynes.  $19,320,  plus  depreciation,  or  a  total  profit  of  $44,600. 

The  Acting  Chairman.  And  in  1940,  $172,147.03  as  against  $105,- 
128.10  expenses,  or  $65,000  profit,  not  including  depreciation. 

Mr.  Haynes.  What  is  that,  sir? 

The  Acting  Chairman.  1940. 

Mr.  Haynes.  Oh,  yes,  1940.  In  '39  there  was  a  net  profit  of  $57,000, 
not  including  depreciation,  or  $81,000  including  it. 

The  Acting  Chairman.  Look  this  statement  over  and  see  if  it  is 
correct. 

Mr.  Haynes.  I  have  a  copy  of  it  here. 

Senator  Ferguson.  May  we  file  these  as  part  of  your  testimony  ? 

(The  financial  statement  referred  to  was  marked  "Exhibit  No.  923" 
and  is  included  in  the  appendix  on  p.  8949.) 

Senator  Ferguson.  What  was  your  business  before  you  went  into  the 
hotel  business  ? 

Mr.  Haynes.  I  have  been  in  this  business  since  I  was  a  boy,  sir. 

Senator  Ferguson.  You  did  not  seek  legal  advice  in  connection  with 
the  cancelation  of  the  lease? 

Mr.  Haynes.  As  a  matter  of  fact  I  didn't  get  the  lease  for  some 
weeks. 

Senator  Ferguson.  I  mean  for  the  cancelation. 

Mr.  Haynes.  No. 

Senator  Ferguson.  Did  you  consult  a  lawyer? 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8691 

Mr.  Haynes.  No,  sir. 

Senator  Ferguson.  Did  you  consult  a  realtor  ? 

Mr.  Haynes.  I  didn't  consult  anybody  until  I  got  the  lease  which 
was  4,  5,  or  6  weeks  after  the  Government  went  into  the  property 
and  I  saw  the  lease  was  to  June  30  and  I  spoke  to  another  hotel  friend 
of  mine  and  he  said,  "That's  the  way  all  leases  are  made.  That's 
their  fiscal  year." 

Senator  Ferguson.  That  was  not  a  Government  man  but  a  hotel 
man? 

Mr.  Haynes.  That's  right. 

The  Acting  Chairman.  So  the  conversation  over  the  telephone 
and  the  terms  of  the  lease  did  not  coincide  ? 

Mr.  Haynes.  At  no  time  was  a  monthly  rental  discussed.  It  was 
a  yearly  rental  at  all  times.  Naturally,  with  these  charges,  sir,  I 
would  have  gone  down  to  Daytona  and  left  Lake  Placid  and  gone  to 
the  chamber  of  commerce,  had  they  told  me  they  wanted  it  for  6 
months  for  $16,000,  which  did  not  equal  my  costs ;  wouldn't  you  ? 

Senator  Ferguson.  That  sounds  reasonable.  You  then  got  a  year's 
lease  subject  to  cancelation,  or  did  you  get  a  shorter  period  ? 

Mr.  Haynes.  My  lease  read  June  30,  1943. 

Senator  Ferguson.  Then  it  was  not  a  year's  lease  ? 

Mr.  Haynes.  As  I  understand,  every  one  of  these  leases  was  the 
same. 

The  Acting  Chairman.  The  point  is  that  you  interpreted  the  con- 
versation to  mean  a  12  months'  period  and  you  actually  got  a 
6  months'  lease  ? 

Mr.  Haynes.  Naturally,  had  I  seen  the  lease  before  the  property  was 
taken  over  I  would  have  questioned  it. 

Senator  Ferguson.  When  did  you  get  it  back  ? 

Mr.  Haynes.  The  lease  ? 

Senator  Ferguson.  The  property. 

Mr.  Haynes.  I  got  the  property  back  June  30. 

Senator  Ferguson.  On  the  day  of  the  expiration  of  the  lease? 

Mr.  Haynes.  They  used  it  actually  6  months  of  1943- 

Senator  Ferguson.  Have  all  the  properties  up  there  been  turned 
back? 

Mr.  Haynes.  No,  sir. 

Senator  Ferguson.  Did  you  request  yours  back  ? 

Mr.  Haynes.  No,  sir. 

Senator  Ferguson.  Has  there  been,  in  your  opinion,  any  favoritism 
in  turning  them  back  ? 

Mr.  Haynes.  As  a  matter  of  fact,  I  have  been  home  sick  a  good  part 
of  the  time  since  I  have  been  back  in  Daytona,  but  I  have  never  heard 
anything. 

Senator  Ferguson.  You  did  nothing  to  get  it  back  ?  It  was  merely 
a  voluntary  cancelation  on  their  part. 

The  Acting  Chairman.  They  ran  out  of  WAC's  ? 

Mr.  Haynes.  No,  sir;  they  built  a  cantonment  in  Daytona  High- 
lands. 

The  Acting  Chairman.  It  was  larger  ? 

Mr.  Haynes.  There  was  a  recreation  building  started  across  the 
street  from  my  hotel ;  the  Geneva  and  other  hotels — oh,  4  weeks  before 


8692     INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM 

we  were  notified  that  it  was  to  be  given  up.  I  understand  it  cost  forty 
or  fifty  thousand  dollars. 

Senator  Ferguson.  Just  before  they  gave  it  up  they  started  a  recrea- 
tion hall  that  cost  forty  or  fifty  thousand  dollars  ? 

Mr.  Haynes.  Yes,  sir. 

The  Acting  Chairman.  How  far  did  it  go  toward  completion  ? 

Mr.  Haynes.  They  completed  it  and  used  it.     It  is  locked  up  now. 

Senator  Ferguson.  They  have  abandoned  your  place  and  spent  a 
couple  of  million  dollars 

Mr.  Haynes  (interposing).  That's  the  report;  $3,000,000. 

Senator  Ferguson.  How  many  rooms  out  there  ? 

Mr.  Haynes.  I  haven't  been  out  there. 

Senator  Ferguson.  And  is  it  the  intention  of  the  Government  to 
move  all  the  WAC's  out  there? 

Mr.  Haynes.  The  15th  of  January — everyone  out  of  the  area. 

Senator  Ferguson.  But  the  recreation  hall  was  completed  when  ? 

Mr.  Haynes.  Two  weeks  after  they  moved  out  of  my  hotel ;  the  3'0th 
of  June. 

The  Acting  Chairman.  It  is  a  frame  structure  ? 

Mr.  Haynes.  No,  sir ;  concrete  blocks. 

Senator  Ferguson.  When  did  they  start  this  place  out  of  Daytona. 

Mr.  Haynes.  That  I  don't  know.  I  spent  the  winter  up  north  last 
winter  and  I  wasn't  in  Daytona. 

Senator  Ferguson.  Do  you  know  when  they  started  the  recreation 
hall? 

Mr.  Haynes.  I  understood  they  started  along  the  first  part  of  May. 

Senator  Ferguson.  And  canceled  your  lease  June  30  ? 

Mr.  Haynes.  Yes,  sir. 

The  Acting  Chairman.  They  just  didn't  renew  your  lease  ? 

Mr.  Haynes.  That's  right.  They  wrote  me  about  May  1  that  they 
were  not  going  to  renew. 

Senator  Ferguson.  Is  your  case  typical  ?  Is  it  about  the  same  with 
the  others  up  there  ? 

Mr.  Haynes.  That  I  don't  know  very  much  about.  I  haven't  been 
out  and  around  very  much.  I  know  it  is  the  same  as  the  neighbor 
across  the  street.  That  is  the  Geneva ;  they  used  his  hotel  for  even  a 
shorter  period  than  mine,  and  his  is  a  hotel  that's  only  open  in  Janu- 
ary, February,  and  March. 

Senator  Ferguson.  How  many  rooms  ? 

Mr.  Haynes.  I  should  say  60  or  maybe  65. 

The  Acting  Chairman.  Mr.  Haynes,  in  Colonel  Fitch's  conversa- 
tion with  you,  did  he  at  any  time  indicate  to  you  or  say  anything  that 
indicated  that  this  lease  was  for  any  period  less  than  a  year  ? 

Mr.  Haynes.  No.     The  only  discussion  was  $33,000  a  year. 

The  Acting  Chairman.  They  didn't  say  on  the  basis  of  $33,000  a 
year? 

Mr.  Haynes.  No,  sir. 

The  Acting  Chairman.  And  you  naturally  inferred  it  was  an 
annual  figure.  Did  you  protest  when  you  received  a  lease  for  only  6 
months? 

Mr.  Haynes.  Oh,  no ;  because  I  was  told  that  is  the  way  the  Govern- 
ment does  business. 

The  Acting  Chairman.  Who  told  you  that  ? 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8693 

Mr.  Haynes.  As  a  matter  of  fact,  a  friend  of  mine  who  runs  the 
Clarendon  told  me  that.  He  had  been  a  banker  in  Washington  and 
he  says  all  the  Government  business  is  done  that  way. 

The  Acting  Chairman.  He  was  telling  you  the  truth.  That  is  the 
customary  way  to  draft  a  lease — on  a  fiscal  basis.  Did  you  know 
that  when  you  agreed  over  the  phone  ? 

Mr.  Haynes.  I  did  not,  sir. 

The  Acting  Chairman.  Was  that  explained  to  you  ? 

Mr.  Haynes.  No,  sir.  I  would  have  gotten  on  the  train  and  gone 
to  Daytona  and  tried  to  get  myself  straight  before  the  local  people, 
because  naturally  I  wouldn't  lease  a  property  for  less  than  my  actual 
taxes  and  insurance. 

Senator  Ferguson.  As  I  understand  it,  75  percent  of  the  hotel  rooms 
were  taken  over  by  the  Government.  How  many  were  returned  by 
June  30? 

Mr.  Haynes.  Oh,  I  don't  know.    I  was  away.    I  was  in  Lake  Placid. 

Senator  Ferguson.  Have  you  any  knowledge  on  that  ? 

Mr.  Haines.  No,  sir;  the  only  large  hotel  that  has  not  been  re- 
turned is  the  Clarendon  and  I  think  that  is  being  returned  within  a 
month  or  so. 

Senator  Ferguson.  Within  this  month  ? 

Mr.  Haynes.  Yes,  sir. 

.  Senator  Ferguson.  And  when  the  Clarendon  is  returned  does  that 
mean  that  practically  all  the  rooms  will  have  been  turned  back? 

Mr.  Haynes.  Yes,  sir. 

The  Acting  Chairman.  Did  you  maintain  a  caretaker  or  anything 
there  while  the  Army  occupied  it? 

Mr.  Haynes.  No,  sir. 

The  Acting  Chairman.  You  had  a  caretaker  at  the  time  they  took 
over  ? 

Mr.  Haynes.  Yes,  sir. 

The  Acting  Chairman.  Did  they  take  him  over  ? 

Mr.  Haynes.  No  ;  but  they  used  him  as  a  plumber  and  engineer. 

PRINCESS  ISSENA  HOTEL — RELEASE  BY  ARMY 

Senator  Ferguson.  How  much  in  damages  did  they  pay  you? 

Mr.  Haynes.  $9,950. 

Senator  Ferguson.  Not  the  $10,000? 

Mr.  Haynes.  No,  sir. 

Senator  Ferguson.  They  said  they  could  pay  up  to  $10,000  without 
an  act  of  Congress  ? 

Mr.  Haynes.  That's  right. 

The  Acting  Chairman.  Mr.  Haynes,  was  that  figure  of  $13,000,  or 
whatever  it  was,  based  upon  actual,  necessary  repairs  to  put  the  hotel 
in  the  condition  it  was  in  when  they  took  it  over,  ordinary  wear  and 
tear  excepted  ? 

Mr.  Haynes.  That's  right. 

The  Acting  Chairman.  You  weren't  doing  anything  additional  ? 

Mr.  Haynes.  Oh,  no,  no. 

The  Acting  Chairman.  And  that  didn't  take  into  consideration 
losses  on  this  6-month  contract? 

Mr.  Haynes.  No,  sir. 


8694     INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM 

The  Acting  Chairman.  It  was  just  for  painting  and  fixing  furni- 
ture and  repairing  carpets  ? 

Mr.  Haynes.  And  it  is  going  to  cost  more  than  my  original  figure,, 
because  we  are  paying  more  for  painters  than  we  thought  we  would 
have  to.  I  am  not  claiming  that.  My  claim  is  that  they  took  my 
hotel  for  the  only  part  of  the  year  that  I  can  use  it  and  they  based 
my  rent 

The  Acting  Chairman  (interposing).  In  other  words,  they  took 
it  for  an  income  year  and  only  paid  half  an  income  year  ? 

Mr.  Haynes.  That's  right. 

Senator  Ferguson.  Have  rents  been  fixed  by  the  O.  P.  A.  in  Daytona 
Beach? 

Mr.  Haynes.  No,  sir. 

Senator  Ferguson.  No  rent  fixing  at  all  ? 

Mr.  Haynes.  No,  sir.  As  a  matter  of  fact,  business  is  very  poor  in 
Daytona  Beach  and  that  takes  care  of  fixing  the  rents.  We  haven't 
raised  our  rents  a  cent. 

Senator  Ferguson.  Is  the  tourist  business  poor  ? 

Mr.  Haynes.  Very  poor. 

Senator  Ferguson.  What  do  you  estimate  your  income  this  season  ? 

Mr.  Haynes.  That  is  very  hard  to  say.  I  doubt  very  much  if  it 
will  be  as  much  as  the  last  season  I  was  open. 

Senator  Ferguson.  Will  it  be  as  much  as  the  Government  paid  you  ? 

Mr.  Haynes.  Oh,  yes,  yes. 

Senator  Ferguson.  It  will  be  that  much  ? 

Mr.  Haynes.  Oh,  yes,  yes. 

Mr.  Halley.  Mr.  Haynes,  when  you  signed  your  lease,  you  under- 
stood it  contained  a  clause  giving  the  Government  the  right  to  cancel 
on  30  days'  notice,  did  you  not  ? 

Mr.  Haynes.  I  did  when  I  signed  it;  yes. 

Mr.  Halley.  Did  you  understand  that  when  you  agreed  to  rent  the 
property  ? 

Mr.  Haynes.  No,  sir. 

Mr.  Halley.  Was  that  not  mentioned  at  all  ? 

Mr.  Haynes.  No. 

Mr.  Halley.  Between  the  time  you  rented  the  property  and  the 
time  you  signed  the  lease  did  the  Government  occupy  the  premises? 
Did  they  take  possession  ? 

Mr.  Haynes.  They  moved  in  December  1, 1  didn't  get  the  lease  until 
several  weeks  afterward. 

Mr.  Halley.  And  at  the  time  you  got  the  lease  you  found  this  30-day 
cancelation  clause? 

Mr.  Haynes.  Yes,  sir. 

Mr.  Halley.  Had  you  known  anything  of  it  before  ? 

Mr.  Haynes.  No,  sir. 

Mr.  Halley.  Did  you  protest  it? 

Mr.  Haynes.  No,  no ;  I  did  not.  Again,  a  good  deal  like  the  June  30- 
business,  it  wouldn't  have  done  any  good  to  protest  it.  They  were  in 
the  property.  I  should  have  insisted  on  a  lease  on  the  day  I  turned 
the  property  over.  That  is  where  I  was  dumb,  but  it  was  an  emer- 
gency and  I  was  doing  business  with  the  Government. 

Mr.  Halley.  Did  the  Army  give  you  a  condition  report  after  they 
took  possession? 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8695 

Mr.  Haynes.  Yes,  sir. 

Mr.  Halley.  Did  you  sign  it  ? 

Mr.  Haynes.  No,  sir. 

Mr.  Halley.  Will  you  tell  the  committee  what  happened  in  con- 
nection with  that  condition  report. 

Mr.  Haynes.  Well,  of  course,  they  certainly  had  someone  who  could 
find  every  flaw  that  might  or  might  not  be  there.  You  know  a  hotel 
with  the  curtains  down  and  things  will  show  up  very  plainly,  but  I 
even  discussed  that  with  some  of  the  men  there  and  I  told  them ;  I  said : 

Here,  we  will  take  this  room  and  look  at  this  one  room  here.  This  room 
brought  us  $12  a  day  last  year.  The  Government  is  paying  us  less  than  40  cents 
a  day  for  it.  Do  you  think  if  I  would  write  to  a  prospective  customer  and 
describe  the  room  as  you  described  it  in  your  report,  and  told  him  the  rate  was 
$12  a  day  that  he  would  take  it? 

Senator  Ferguson.  But  you  would  have  rented  that  without  repairs 
or  decorations  for  $12  a  day  ? 

Mr.  Haynes.  Yes,  sir ;  that  is,  with  meals. 

The  Acting  Chairman.  That  is  as  it  was  when  you  turned  it  over  ? 

Mr.  Haynes.  Yes,  sir. 

The  Acting  Chairman.  When  was  the  condition  report  made  up 
with  reference  to  the  time  of  occupancy  ? 

Mr.  Haynes.  It  was  some  weeks  after  they  took  over.  You  see,  I 
came  down  and  got  the  carpets  out  and  left  here  in  November  and 
went  back  to  Lake  Placid. 

The  Acting  Chairman.  Did  you  leave  your  furniture  there? 

Mr.  Haynes.  The  part  they  told  me  to  leave. 

The  Acting  Chairman.  What  was  that  ? 

Mr.  Haynes.  Beds,  bureaus,  mattresses,  one  pillow  to  each  bed,  cer- 
tain chairs  that  weren't  upholstered,  no  rugs  or  carpets. 

The  Acting  Chairman.  Was  there  damage  to  your  furniture? 

Mr.  Haynes.  Not  too  much ;  no. 

Senator  Ferguson.  What  was  the  real  dispute  between  you  and  the 
Government  when  they  turned  it  back  on  this  difference  between 
$13,000  and  $9,000? 

Mr.  Haynes.  They  claimed  that  the  figure  was  far  more  than  it 
would  take  to  put  the  hotel  back  in  shape. 

Senator  Ferguson.  It  was  not  the  question  of  what  was  the  damage 
under  the  clause  "reasonable  wear  and  tear  acceptable"  ? 

Mr.  Haynes.  The  officer  there  said  that  a  lot  of  things  I  said,  such 
as  sanding  the  floor,  for  instance,  they  mopped  the  lobbies  and  that 
took  the  paint  off,  and,  for  instance,  we  put  on  a  new  oak  floor  and 
a  big  lobby  there  and  the  mopping  raised  the  grain  of  that  and  it 
meant  sanding  and  refinishing,  and  he  said,  "That's  ordinary  wear." 
I  said  that  might  be  barracks'  wear  and  tear,  but  not  ordinary  wear 
and  tear,  because  we  don't  put  four  to  eight  hundred  people  in  the 
place,  and  they  wouldn't  scuff  up  and  tear  up  the  floor  like  they  were 
torn  up. 

Mr.  Halley.  Did  the  Government  rely  on  the  barracks,  wear-and- 
tear  clause  ? 

Mr.  Haynes.  He  maintained  that  a  lot  of  these  things  I  said  needed 
to  be  done  was  regular  wear  and  tear. 

Mr.  Halley.  In  calculating  your  $13,000  figure  for  damages,  did 
you  make  allowance  for  expenses  which  you  would  ordinarily  have 


8696     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

incurred  if  you  were  operating  the  property,  because  you  have  an 
$8,000  maintenance  figure  of  your  own  ? 

Mr.  Haynes.  That's  right.  You  see,  we  have  had  to  paint  every 
room  in  the  hotel.  There  hasn't  been  a  single  room  that  hasn't  been 
painted.  Normally,  we  try  to  get  around  every  4  years.  We  haven't 
sanded  the  floors,  because  we  haven't  been  able  to  get  sanders. 

Senator  Ferguson.  What  is  your  percentage  of  occupancy  now  ? 

Mr.  Haynes.  We  have  only  25  people.  We  don't  have  the  big  house 
open.     We  just  have  the  small  place  open. 

The  Acting  Chairman.  You  are  operating  the  inn  ? 

Mr.  Haynes.  We  open  the  big  hotel  the  15th.  The  fact  that  we 
haven't  business  now  is  largely  due  to  the  fact  that  the  town  was  closed 
down  last  year.  Our  golf  links  were  closed  and  people  went  other 
places.  I  can  show  you  letters  from  maybe  8  or  10  people  saying  they 
will  be  back  next  year,  but  this  year  they  don't  want  to  come  back 
while  the  WAC's  are  there,  even  though  you  tell  them  they  are  going 
out  the  middle  of  January. 

Senator  Ferguson.  Is  there  anything  else  you  want  to  add  to  the 
record  ? 

Mr.  Haynes.  No,  sir. 

The  Acting  Chairman.  Thank  you  very  much,  Mr.  Haynes. 

We  have  some  people  here  from  St.  Petersburg.  Mr.  Neil  Upham, 
vice  president  of  the  Hotel  Owners  Association. 

Do  you  solemnly  swear  that  the  evidence  you  give  in  the  matter  now 
in  hearing  shall  be  the  truth,  the  whole  truth  and  nothing  but  the 
truth,  so  help  you  God  ? 

Mr.  Upham.  I  do. 

TESTIMONY  OP  NEIL  W.  UPHAM,  VICE  PRESIDENT,.  ST.  PETERS- 
BURG HOTELMEN'S  ASSOCIATION 

ARMY  ACQUISITION  OF  HOTELS  IN  ST.  PETERSBURG 

The  Acting  Chairman.  Will  you  state  your  name  and  official  con- 
nection ? 

Mr.  Upham.  Neil  W.  Upham,  vice  president,  St.  Petersburg  Hotel- 
men's  Association,  and  I  am  engaged  in  the  real-estate  business  in  St. 
Petersburg,  as  well  as  being  part  owner  of  the  Royal  Palm  Hotel. 
Mr.  Goheen  from  St.  Petersburg  represents  the  Beverly  Hotel,  and 
part  of  our  testimony 

The  Acting  Chairman.  We  will  swear  him,  too.  Mr.  Goheen,  do 
you  solemnly  swear  that  the  evidence  you  give  in  the  matter  now  in 
hearing  shall  be  the  truth,  the  whole  truth,  and  nothing  but  the  truth, 
so  help  you  God  ? 

Mr.  Goheen.  I  do. 

The  Acting  Chairman.  I  believe,  Mr.  Goheen,  you  are  connected 
with  the  Beverly  Hotel? 

Mr.  Goheen.  That's  right. 

The  Acting  Chairman.  What  is  your  official  position  with  the  hotel  ? 

Mr.  Goheen.  I  am  one  of  the  coowners. 

The  Acting  Chairman.  What  is  the  size  of  that  hotel? 

Mr.  Goheen.  Seventy-five  rooms. 


INVESTIGATION    OF    THE    NATIONAL    DEFENSE    PROGRAM     8697 

The  Acting  Chairman.  Seventy -five  rooms? 

Mr.  Goheen.  Yes,  sir. 

The  Acting  Chairman.  You  may  go  ahead  with  your  statement, 
Mr.  Upham,  and  Mr.  Goheen  can  interject. 

Senator  Ferguson.  Are  they  all  leases  in  St.  Petersburg  and  no 
purchases  ? 

Mr.  Upham.  There  was  one  purchase,  the  Don  Ce-Sar  Hotel. 

The  Acting  Chairman.  What  was  that  construction? 

Mr.  Upham.  Triple  A;  fireproof,  steel  construction  hotel. 

Senator  Ferguson.  Why  was  there  a  purchase  there-  and  not  a  lease  ? 

Mr.  Upham.  It  was  desired  for  a  hospital.  The  Navy  was  about  to 
take  it  over  when  the  Air  Forces  came  and  took  it. 

Senator  Ferguson.  That  is  to  remain  as  a  permanent  hospital;  a 
veterans'  hospital? 

Mr.  Upham.  As  far  as  we  know.  It  is  about  6  miles  from  the  Bay 
Pines  Veterans'  Facility.  It  is  on  the  beach.  The  Bay  Pines  Hospital 
is  not  in  St.  Petersburg ;  it  is  just  outside. 

The  Acting  Chairman.  I  know  where  that  is. 

Mr.  Upham.  It  is  just  down  the  beach  from  Bay  Pines. 

The  Acting  Chairman.  How  big  is  the  Don  Ce-Sar? 

Mr.  Upham.  325  rooms;  275  rooms  were  finished  at  the  time  the 
Army  took  it  over. 

The  Acting  Chairman.  Is  it  a  new  hotel? 

Mr.  Upham.  It  was  built  in  '27  and  opened  in  '28,  but  it  never 
was  completely  finished — 50  rooms  being  unfinished. 

Senator  Ferguson.  That  is  the  one  the  Government  purchased? 

Mr.  Upham.  The  Government  purchased  that ;  yes,  sir. 

Senator  Ferguson.  You  don't  want  to  talk  about  that  one  today. 
You  are  not  concerned  with  it? 

Mr.  Upham.  They  are  not  members  of  our  association  over  there 
because  they  are  not  in  the  hotel  business  at  all.  We  don't  represent 
the  former  owners  of  that  property. 

We  have  the  question  of  rents  in  St.  Petersburg.  I  was  very  inter- 
ested in  General  Arnold's  statement. 

Senator  Ferguson.  Has  the  O.  P.  A.  fixed  rents  in  St.  Petersburg  ? 

Mr.  Upham.  Yes,  on  the  basis  of  March  1,  1942. 

Senator  Ferguson.  When  did  they  fix  them? 

Mr.  Upham.  In  September  of  1942. 

Senator  Ferguson.  In  September  of  1942  ? 

Mr.  Upham.  Yes,  sir.  That  covers  the  entire  Tampa  and  St.  Peters- 
burg area. 

Senator  Ferguson.  When  did  they  start  to  take  these  leases  of  St. 
Petersburg  property? 

Mr.  Upham.  We  optioned  our  hotels  to  Major  Fitch  in  March — no, 
that  was  June.     He  made  a  survey  in  March. 

Senator  Ferguson.  And  you  gave  him  options  ? 

Mr.  Upham.  We  gave  him  options  in  June  and  the  leases  were  ex- 
ecuted in  every  case  after  the  property  was  occupied  by  the  Army — 
in  every  case. 

Senator  Ferguson.  Who  occupies  the  properties? 

Mr.  Upham.  Air  forces. 

Senator  Ferguson.  How  many  rooms  ? 

311032 — 44 — pt.  21 13 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

Mr.  Upham.  The  number  of  room,  referring  to  the  Byrd  report,  was 
6,236  out  of  a  possible  6,800/  We  were  about  90  percent  occupied  by 
the  Army. 

The  Acting  Chairman.  You  are  speaking  only  of  hotel  rooms  ? 

Mr.  Upham.  Yes,  sir.  There  were  some  apartments  in  the  Army 
base,  but  there  were  less  than  700  rooms.  I  would  say  less  than 
700  rooms  were  left  out  of  the  base. 

Senator  Ferguson.  And  when  did  they  start  to  cancel  ? 

Mr.  Upham.  They  started  the  cancelation  in  June  of  1943. 

Senator  Ferguson.  How  many  have  they  canceled? 

Mr.  Upham.  All  of  them. 

Senator  Ferguson.  All  have  been  canceled  out  ? 

Mr.  Upham.  There  have  been  four  hotels  transferred  to  the  War 
Shipping  Administration  with  the  understanding  that  the  War  Ship- 
ping Administration  was  to  accept  the  Army  leases.  The  War  Ship- 
ping Administration  now  is  declining  to  accept  the  Army  leases  and 
wants  revision  of  their  contracts. 

Senator  Ferguson.  Why  ? 

Mr.  Upham.  I  am  not  familiar  with  those  details. 

Senator  Ferguson.  Do  they  claim  the  rents  are  too  high? 

Mr.  Upham.  In  the  case  of  the  Vinoy  Park  Hotel  in  which  I  have 
a  small  interest,  the  Army  gave  the  management  the  use  of  42  store- 
rooms. I  understand  the  War  Shipping  Administration  is  claiming 
they  have  the  entire  building  and  they  want  the  Vinoy  Park  Hotel  to 
move  its  storage  goods  out  of  the  storerooms  at  considerable  expense. 

Senator  Ferguson.  What  does  the  War  Shipping  Administration 
use  these  hotels  for  ? 

Mr.  Upham.  For  barracks  and  training  of  students  in  connection 
with  the  maritime  base  at  St.  Petersburg. 

Senator  Ferguson.  How  many  rooms  are  under  the  War  Shipping 
Administration  ? 

Mr.  Upham.  About  800,  sir. 

Senator  Ferguson.  What  is  the  chief  complaint ;  first  on  the  taking 
over,  and  second  on  the  return  ? 

Mr.  Upham.  On  the  leasing,  the  St.  Petersburg  Hotelmen's  Asso- 
ciation has  forwarded  a  resolution  to  the  War  Department  and  to  the 
Truman  committee.  This  resolution  was  passed  in  October  and  it 
goes  into  detail  with  respect  to  the  leasing. 

(The  document  referred  to  was  marked  "Exhibit  No.  924"  and  is 
included  in  the  appendix  on  p.  8951.) 

Senator  Ferguson.  Prior  to  the  leasing  did  you  go  to  Washington  to 
try  to  get  some  Army  or  Navy  activity,  or  both,  in  St.  Petersburg  ? 

Mr.  Upham.  I  think  representatives  of  St.  Petersburg  hotels  came 
to  Miami  Beach  and  talked  with  Captain  Fitch,  who  was  a  captain 
at  that  time. 

Senator  Ferguson.  You  tried  to  get  the  business  ? 

Mr.  Upham.  One  hotel,  the  Soreno  in  particular,  did. 

Senator  Ferguson.  Did  the  association  do  it  ? 

Mr.  Upham.  The  association,  as  an  association,  did  not  do  it.  The 
chamber  of  commerce  was  interested  in  getting  an  Army  base  there 
in  St.  Petersburg. 

1  In  this  connection  see  Exhibit  No.  925,  appendix,  p.  8953. 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8699 

Senator  Ferguson.  Did  the  chamber  of  commerce  try  to  get  the 
business  ? 

Mr.  Upham.  I  don't  think  the  chamber  of  commerce  ever  went  to 
Washington  until  the  notice  of  cancelation  was  received  and  the 
chamber  tried  to  get  continuation  of  the  leases  or  other  use  by  the 
Government.  We  felt  the  hotels  had  been  occupied  and  any  damage 
had  accrued,  and  if  the  Government  would  keep  on  it  would  be  better. 

Senator  Ferguson.  They  canceled  as  of  June— the  fiscal  year, 
so-called  ? 

Mr.  Upham.  The  cancelations  ran — well,  nine  notices  were  sent  out 
in  June  and  ran  some  on  the  31st  of  July,  some  on  the  8th  of  August, 
and  some  later  on  in  August.    It  was  during  that  summer  period. 

Senator  Ferguson.  What  is  your  date  over  there  for  occupancy  for 
the  tourist  business  ? 

Mr.  Upham.  November  1. 

Senator  Ferguson.  That  is  much  earlier  than  here  ? 

Mr.  Upham.  We  have  a  very  much  earlier  and  very  much  later 
season. 

Senator  Ferguson.  Rather  than  read  that  [referring  to  document] , 
because  we  are  familiar  with  that,  we  would  like  anything  you  may 
have  to  add  to  your  testimony  here. 

Mr.  Upham.  One  of  the  things  I  started  to  comment  on  is  the  report 
that  General  Arnold  has  made  that  the  average  cost  per  man  in  Miami 
Beach  area  was  $119  per  year.  Based  on  the  Byrd  committee  figures, 
the  average  per  man  cost  in  St.  Petersburg  was  $58  per  year.  The 
story  on  our  leasing  was  similar  to  that  which  you  have  heard  from 
Mr.  DuPree  and  Mr.  Haynes.    We  were  not  given  an  opportunity 

(The  document  referred  to  was  marked  "Exhibit  No.  925"  and  is 
included  in  the  appendix  on  p.  8953.) 

Senator  Ferguson  (interposing).  Normally  what  is  the  difference 
in  rent  between  St.  Petersburg  and  Miami  Beach  ? 

Mr.  Upham.  That  is  something  I  can't  say,  sir. 

Senator  Ferguson.  You  don't  know  what  that  is  ? 

Mr.  Upham.  No,  sir.  The  picture  varies  so  greatly,  even  in  Miami 
Beach.    Some  hotels  get  very  high  rates  and  some  of  them  are  moderate. 

The  Acting  Chairman.  Mr.  Upham,  wasn't  there  a  condition  exist- 
ing in  St.  Petersburg  that  the  chamber  of  commerce,  the  business 
people,  were  very  anxious  to  get  these  hotels  taken  over  by  the  Army 
in  order  to  facilitate  the  operation  of  an  Army  base  there  ?  In  other 
words,  wasn't  there  a  little  high  pressuring  going  on  on  the  hotel  men 
from  local  groups  in  this  campaign  ? 

Mr.  Upham.  There  was  some  high  pressure;  yes.  We  all  wanted 
to  be  patriotic. 

The  Acting  Chairman.  When  did  this  happen  ? 

Mr.  Upham.  That  occurred  in  June  of  1942. 

The  Acting  Chairman.   1942  ? 

Mr.  Upham.  And  I  might,  in  a  way,  plead  guilty  in  that  once  I 
understood  the  Army  was  coming  in,  as  a  hotel  man,  and  interested 
in  the  town,  I  helped  Major  Fitch  make  leases  and  make  negotiations. 
I  was  instrumental,  for  instance,  in  leasing  the  Mount  Vernon  Hotel. 
The  owners  have  a  summer  resort  in  Minnesota,  and  I  talked  to  them 
several  times  on  the  long-distance  telephone  and  told  them  what 
representations  Colonel  Fitch  made  to  me  about  the  property  and 


8700     INVESTIGATION   OF    THE    NATIONAL    DEFENSE    PROGRAM 

what  rent  the  Army  would  pay,  and  how  it  would  be  returned,  and  on 
the  basis  of  that  conversation  they  took  over. 

Senator  Ferguson.  What  did  Fitch  tell  you  ? 

Mr.  Upham.  He  told  us  he  couldn't  pay  but  a  certain  amount  of 
rent. 

The  Acting  Chairman.  What  was  that  based  on?  Did  he  give  you 
the  basis  for  those  figures  ? 

Mr.  Upham.  We  don't  know,  but  we  believe  it  was  based  on  the 
county  valuations. 

Senator  Ferguson.  Why  do  you  say  that  you  believe  that  ? 

Mr.  Upham.  Any  further  questioning  was  always  answered  that 
the  matter  was  a  military  secret. 

Senator  Ferguson.  How  could  a  thing  like  that  be  a  military  secret 
as  to  what  the  rate  would  be?  Wrere  they  about  to  launch  an  attack 
on  St.  Petersburg  ?     How  do  you  think  that  would  help  the  enemy  ? 

Mr.  Upham.  Senator,  when  a  man  in  uniform,  particularly  an  offi- 
cer's uniform  of  the  United  States  Army,  tells  you  something  and  tells 
you  it  is  to  be  confidential,  and  tells  you  that  you  can't  reveal  it  because 
of  confidence,  we  respect  the  uniform  and  don't  question  it  further. 

The  Acting  Chairman.  Isn't  too  much  abuse  of  that  apt  to  lead  to 
a  growing  disrespect  for  the  uniform  in  business  dealings  ? 

Mr.  Upham.  If  it  were  abused  it  could ;  yes. 

The  Acting  Chairman.  And  you  were  not  told  any  basis  on  which 
these  rentals  were  being  computed  ? 

Mr.  Upham.  We  were  not. 

The  Acting  Chairman.  Did  you  offer  to  furnish  a  basis  for  com- 
putation of  rentals  ? 

Mr.  Upham.  We  did,  and  if  you  were  to  take  the  rentals  paid  for 
the  St.  Petersburg  hotels  you  will  find  no  uniformity  whatsoever. 

Senator  Ferguson.  How  do  you  account  for  that  ? 

Mr.  Upham.  Well,  bargaining  power.  I  mean  some  of  the  people 
just  laid  down  and  rolled  over  when  Fitch  said  so  and  others  stood 
up  on  their  hind  legs  and  said  they  couldn't  get  by  with  that. 

The  Acting  Chairman.  Some  of  them  had  more  sales  resistance? 

Senator  Ferguson.  Were  any  condemnation  cases  started? 

Mr.  Upham.  No,  sir. 

Senator  Ferguson.  Was  any  citizens'  association  formed  to  keep 
them  from  being  started  ? 

Mr.  Upham.  No,  sir ;  some  informal  pressure. 

Senator  Ferguson.  Was  there  any  publicity  on  the  question  that 
the  Army  may  not  come  and  the  people  ought  to  go  ahead  and  lease  ? 

Mr.  Upham.  The  St.  Petersburg  Times  came  out  with  a  banner  head- 
line stating  that  the  Army  was  definitely  coming  in ;  that  was  before 
the  arrangements  were  made,  and  the  War  Department,  we  under- 
stood, took  great  exception  to  that  and  it  was  rumored  in  St.  Peters- 
burg that  because  the  St.  Petersburg  paper  jumped  the  gun  that  the 
Army  would  not  come  in. 

Senator  Ferguson.  Did  anybody  in  the  Army  tell  you  that  they 
resented  that  and  that  was  going  to  increase  their  rentals  and  they 
weren't  coming  in  ?     Where  do  you  get  your  information? 

Mr.  Upham.  No ;  I  didn't  infer  that  that  was  used  by  the  Army 
at  all  to  beat  down  rents.  That  was  not  the  case,  but  that  was  part 
of  the  civilian  feeling  about  getting  the  Army  base  in  there. 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM     8701 
ROYAL  PALM  HOTEL,  ST.  PETERSBURG ACQUISITION  AND  RELEASE  BY  ARMY 

Senator  Ferguson.  The  civilians  got  that  slant  on  it  ? 

Mr.  Upham.  They  felt  perhaps  as  hotel  owners  we  weren't  being 
reasonable  enough  in  turning  over  our  properties.  For  instance,  in 
my  own  case,  I  leased  the  Royal  Palm  Hotel  and  Fitch  didn't  want 
to  pay  but  $11,500. 

(The  document  referred  to  was  marked  "Exhibit  No.  926"  and  is 
included  in  the  appendix  on  p.  8954.) 

The  Acting  Chairman.  That  was  a  year  ? 

Mr.  Upham.  A  year,  and  our  carrying  charges,  not  including  war 
damage  insurance  was  $11,446. 

Mr.  Halley.  What  do  you  figure  in  your  carrying  charges  ? 

Mr.  Upham.  Interest  on  the  mortgage,  taxes,  insurance,  $600  for 
exterior  maintenance  and  nothing  for  depreciation,  because  we  were 
told  repeatedly  by  Colonel  Fitch  that  our  properties  would  be  returned 
in  as  good  condition,  if  not  better,  than  when  we  turned  them  over  to 
the  Army.     He  allowed  us  to  figure  for  exterior  depreciation. 

The  Acting  Chairman.  Did  he  tell  you  that  personally  ? 

Mr.  Upham.  Yes,  sir,  and  Mr.  Goheen. 

Mr.  Goheen.  Yes,  sir. 

Mr.  Halley.  Did  he  tell  you  not  to  make  any  allowance  to  the 
interior  wear  and  tear  ? 

Mr.  Upham.  Absolutely. 

Mr.  Halley.  And  did  he  make  any  statement  as  to  the  number  of 
men  to  occupy  the  building  ? 

Mr.  Upham.  The  owners  of  the  Seneca  Hotel  and  the  Butler  Arms 
Hotel  were  in  the  north  and  they  called  down  to  me  and  asked  me  to 
see  what  negotiations  could  be  made  on  their  particular  properties. 
They  figured  that  what  Fitch  offered  them  was  not  fair,  so  I  personally 
took  Fitch  to  those  hotels.  He  went  in  1  room,  paced  it  off,  and 
said,  "We  can  get  2  men  in  this  room.  The  Surgeon  General  says 
we  must  have  60  square  feet  per  man  in  a  room."  I  know  he  did  that 
in  2  hotels.  One  of  the  other  representatives  went  with  Mr.  Goheen 
to  his  hotel.  I  know  in  those  rooms  where  Fitch  said  they  could  put 
2  men  they  put  6  men  and  sometimes  8  men,  so  there  was  noth- 
ing normal  about  the  wear  and  tear  those  hotels  received.  When  you 
got  down  to  settlements,  what  happened  was  that  Colonel  Fitch  Came 
to  my  hotel  first,  the  latter  part  of  June.  He  called  me  at  8 :  30  in  the 
morning.  I  met  him  at  9  o'clock.  There  were  11  in  his  party  and  I 
was  by  myself.  We  later  changed  procedure,  but  we  had  to  go,  the 
12  of  us,  in  1  room  and  I  was  to  see  what  Army  damage  had  transpired 
in  that  room.  I  said  I  couldn't  do  it  that  way.  I  couldn't  even  think 
with  that  crowd  around  me  and  we  changed  procedure. 

(The  document  referred  to  was  marked  "Exhibit  No.  927"  and  is 
included  in  the  appendix  on  p.  8959.) 

Senator  Ferguson.  Who  were  these  12  men  ? 

Mr.  Upham.  All  from  his  staff. 

Senator  Ferguson.  You  were  the  thirteenth  man? 

Mr.  Upham.  I  was  the  twelfth. 

Senator  Ferguson.  Why  did  he  want  so  many  with  you  ? 

Mr.  Upham.  He  had  them  with  him.     I  didn't  have  anybody. 

Mr.  Halley.  Did  you  ask  permission  to  bring  anyone  ? 


8702     INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM 

Mr.  Upham.  This  was  the  first  hotel  inspected.  There  was  no  set 
procedure.  The  procedure  later  Colonel  Fitch  did  modify  because  it 
was  unwieldy  and  didn't  work.  We  made  a  survey  of  that  hotel  during 
the  day,  the  Army  making  its  notes.  The  following  morning  I  was 
called  to  Colonel  Fitch's  office  and  after  2  hours  he  asked  me  what 
figure  I  had  in  mind  for  army  damage,  and  I  told  him  I  had  no  figure ; 
that  I  hadn't  had  a  chance  to  get  a  furniture  man,  or  a  mattress  man,  or 
a  painter,  or  carpenter,  or  plumber,  in  that  hotel.  He  said  I  should  be 
happy  with  the  figure  he  had  in  mind.  The  post  engineer  had  made 
a  very  thorough  survey  and  it  took  me  2  hours  to  find  out  why  I  should 
be  very  happy  with  $810  for  a  94-room  hotel.  He  told  me  the  post 
engineer  before  he  came  there  had  figured  $179  was  all  the  Govern- 
ment owed  the  Royal  Palm.  What  he  based  that  on,  I  don't  know. 
I  never  understood  what  the  $810  was  based  on.  That  was  also  a 
military  secret. 

(The  document  referred  to  was  marked  "Exhibit  No.  928"  and  is 
included  in  the  appendix  on  p.  8961.) 

Senator  Ferguson.  Did  he  tell  you  that? 

Mr.  Upham.  Yes,  sir. 

The  Acting  Chairman.  Did  they  use  your  beds  ? 

Mr.  Upham.  They  used  68  of  them,  sir. 

The  Acting  Chairman.  Wooden  or  steel  beds? 

Mr.  Upham.  We  had  54  wooden  beds  and  the  others  were  steel  beds. 

The  Acting  Chairman.  What  if  any  damage  was  done  to  the  beds  ? 

Mr.  Upham.  The  mattresses  that  the  boys  cut  in  order  to  hide  their 
liquor  were  recovered  by  the  Army;  the  mattresses  that  had  urine 
stains  were  left.  Twenty  of  the  68  had  urine  stains.  There  were  28 
with  broken  innersprings ;  there  were  two  hair  mattresses  that  were 
not  our  property  and  heaven  knows  where  they  came  from. 

Senator  Ferguson.  Did  you  rehabilitate? 

Mr.  Upham.  Yes,  sir. 

Senator  Ferguson.  What  did  it  cost  you  ? 

Mr.  Upham.  As  far  as  I  can  figure  I  have  spent  this  fall  $20,000. 
Part  of  that  is  taxes  that  I  should  have  the  money  from  rents  to  do 
with. 

Senator  Ferguson.  How  about  repairs  ? 

Mr.  Upham.  I  have  spent  $9,100 — the  figure  goes  up  every  day.  To 
figure  repairs  I  figure  strictly  Army  damage. 

Senator  Ferguson.  How  nearly  completed  is  that  ? 

Mr.  Upham.  Practically  completed. 

Senator  Ferguson.  At  a  cost  of  $9,100  ?      ' 

Mr.  Upham.  Yes,  sir. 

Senator  Ferguson.  And  what  did  the  Army  allow  you  ? 

Mr.  Upham.  Twelve  hundred  gallons  of  oil  that  was  in  the  tank. 
That  is  all  I  have  gotten  so  far. 

Senator  Ferguson.  You  haven't  signed  a  settlement?  You  haven't 
settled  ? 

The  Acting  Chairman.  Twelve  hundred  gallons  of  furnace  oil? 

Mr.  Upham.  Yes,  sir. 

The  Acting  Chairman.  What  is  that  worth  ? 

Mr.  Upham.  About  $95,  sir.  I  might  say,  Senator,  that  we  did  not 
take  the  $810.     Then  the  Army  restored  the  Royal  Palm  Hotel  and  it 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM     8703 

spent  approximately  $2,000.  The  man  I  talked  with,  along  with 
Colonel  Fitch  in  looking  toward  restoration  admitted  from  the  post 
figures  that  it  would  run  between  six  and  seven  thousand  dollars. 

Senator  Ferguson.  Was  there  anybody  superior  to  Colonel  Fitch 
that  talked  to  you  ? 

Mr.  Upham.  Yes,  sir;  after  we  objected  to  the  basis.  I  will  say 
this  for  Fitch:  I  think  Fitch  did  an  excellent  job,  perhaps;  from  a 
property  owner's  standpoint  too  good  a  job  for  the  Government.  As  a 
taxpayer  I  can  compliment  that  kind  of  work  except  where  it  works 
hardships  as  it  can  only  too  frequently  do.  When  he  came  in  to 
make  his  settlements,  I  think  he  was  trying  to  save  the  Government 
money,  but  he  tried  to  save  too  much  at  the  expense  of  the  property 
owners.  For  instance,  I  have  the  settlement  figures  on  21  hotels  and 
apartment  houses  which  the  Army  settled  for  $100,541  and  the  actual 
cost  would  run  $200,175.44.1 

Senator  Ferguson.  Have  you  ever  found  anybody  else  in  St.  Peters- 
burg that  tried  to  save  money  for  the  Government? 

Mr.  Upham.  Yes,  sir.     I  think  it's  a  good  trait. 

Senator  Ferguson.  But  have  you  found  people  other  than  Fitch? 

Mr.  Upham.  I  think  in  the  exigencies  of  making  war,  we  are  more 
careless  than  we  might  otherwise  be  with  money,  but  Fitch  leans  over 
backward. 

The  Acting  Chairman.  Let  me  ask  you  this,  Mr.  Upham:  You 
talked  about  the  Government  reconditioning  the  Royal  Palm  Hotel. 
What  did  they  do  to  the  Royal  Palm  Hotel  ? 

Mr.  Upham.  They  went  in  and  varnished  the  floors  without  cleaning 
them,  over  gum,  cigarette  burns,  the  marks  the  composition  shoes  make. 
They  use  GI  soap,  which  took  off  some  of  the  old  varnish  and  they 
varnished,  right  over  it.    I  have  pictures  of  that. 

The  Acting  Chairman.  What  else  did  they  do  ? 

Mr.  Upham.  They  would  go  in  a  room  and  paint  one  baseboard 
up  to  the  door.  They  would  not  paint  the  door  trim,  but  they  painted 
the  door.  None  of  that  matched,  and  some  rooms  they  painted  two 
walls,  others  they  painted  four  walls,  and  the  painting  was 

The  Acting  Chairman  (interposing).  Is  it  possible  to  paint  one  wall 
in  a  room  and  have  a  real  paint  job  ? 

Mr.  Upham.  We  told  Colonel  Fitch  we  didn't  feel  that  was  possible 
but  he  went  right  on. 

The  Acting  Chairman.  What  were  they  using,  water-base  or  oil- 
base  paint? 

Mr.  Upham.  We  used  a  high-grade  casein  water-base  paint. 

The  Acting  Chairman.  And  did  you  varnish  over  that? 

Mr.  Upham.  We  just  painted  right  over  that.  On  the  woodwork 
they  used  enamel,  but  they  used  the  casein  paint  over  our  oil  paint, 
in  the  public  rooms,  and  we  are  having  a  hard  time  to  correct  that  now. 

The  Acting  Chairman.  For  a  soft  finish  that  casein  is  very  good  on 
walls  in  bedrooms  ?     Is  that  right  ? 

Mr.  Upham.  It's  an  inexpensive  paint  in  a  room  that  can  stand. 

The  Acting  Chairman.  Where  it  is  not  a  heavy  duty  room  ? 

Mr.  Upham.  It  is  not  a  heavy  duty  paint.  I  don't  know  that  there 
is  any  heavy  duty  paint  in  a  barracks. 

1  See  Exhibit  No.  930,  appendix,  p.  8963. 


8704     INVESTIGATION   OF    THE    NATIONAL    DEFENSE    PROGRAM 

The  Acting  Chairman.  Then  they  gave  some  painting?  Anything 
else  ?     Did  that  include  reconditioning  any  furniture  ? 

Mr.  Upham.  They  reconditioned  the  94  dressers  we  left. 

The  Acting  Chairman.  How  did  they  do  that? 

Mr.  Upham.  They  did  a  nice  job,  sir,  but  they  did  not  do 

The  Acting  Chairman    (interposing).  Who  did  that  for  them? 

Mr.  Upham.  One  of  the  local  furniture  plants.  They  did  not  do 
any  of  the  desks  or  any  of  the  beds.  They  mended  two  or  three  of  the 
bed  legs  that  were  broken.  We  had  to  mend  some  more  and  they  made 
no  effort  to  replace  broken  chairs  or  to  upholster  them  or  do  anything 
with 

The  Acting  Chairman  (interposing).  What  else? 

Mr.  Upham.  Maybe  half  a  dozen  wood  chairs  were  varnished  by 
the  Army. 

The  Acting  Chairman.  You  say  that  cost  about  $2,000.  What  was 
done  ? 

Mr.  Upham.  I  believe  the  work  on  the  furniture  was  $700. 

The  Acting  Chairman.  You  have  spent  $9,100  ? 

Mr.  Upham.  I  have  spent  $9,100  of  money  on  what  I  consider  was 
due  entirely  to  Army  damage. 

The  Acting  Chairman.  In  addition  to  what  they  spent  ? 

Mr.  Upham.  In  redoing  the  hotel. 

The  Acting  Chairman.  As  a  matter  of  fact,  if  the  floors  were  var- 
nished the  way  you  say  they  were 

Mr.  Upham  (interposing).  We  had  to  sand  them.  That  cost  us  50 
percent  more  time  and  material  than  it  would  have  if  the  Army  hadn't 
varnished  them  at  all.  The  varnish  was  put  over  lye-treated  surface ; 
the  varnish  did  not  dry  and  when  you  put  a  machine  on  it  it  gums  right 
up.  We  have  repainted  that  hotel,  every  bit  of  the  woodwork,  100  per- 
cent. We  had  to  repaint  60  percent  of  the  walls  and  90  percent  of  the 
ceilings. 

The  Acting  Chairman.  Have  they  made  an  alternative  offer  over 
and  above  the  $800? 

Mr.  Upham.  I  don't  think  from  my  experience  with  the  War  De- 
partment— well,  I  will  say  this.  From  my  experience  with  the  War 
Department,  except  with  Colonel  Fitch,  the  contacts  have  been  very 
pleasant  with  the  Department.  I  did  not  sign  a  release  and  several 
weeks  ago  I  went  to  Washington  and  laid  my  problem  before  the  War 
Department.  The  War  Department,  as  I  understand  it,  cannot  make 
an  alternative  offer. 

Senator  Ferguson.  What  do  you  mean  by  that?  Once  they  offered 
the  $800  they  can't  change  it? 

Mr.  Upham.  They  restored  the  hotel.  If  I  can  convince  them  that 
we  have  been  damaged,  the  procedure,  as  I  understand  it,  is  to  appoint 
in  the  Department  a  board  of  claims.  They  could  make  a  settlement 
with  me  up  to  the  extent  of  $1,000  under  the  law,  but  anything  over 
that  has  to  be  treated  specially. 

The  Acting  Chairman.  Do  you  have  the  citation  of  the  law  they  are 
talking  about? 

Mr.  Upham.  Colonel  O'Brien  can  verify  that. 

Senator  Ferguson.  They  told  you  $1,000? 

Mi-.  Upham.  Last  week  Colonel  Seymour  came  to  me  and  told  me 
that  all  the  War  Department  could  settle  without  a  review  by  the 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8705 

Comptroller  General  was  amounts  not  to  exceed  $1,000.  My  claim 
obviously  is  larger  than  that  and  I  could  not  accept  $1,000. 

The  Acting  Chairman.  Nothing  was  said  about  $10,000  ? 

Mr.  Upham.  No,  sir.  I  was  looking  over  these  settlements.  I  do 
know  in  one  instance  a  settlement  of  $20,000  in  cash  was  made  and 
there  are  some  hotels  that  are  larger  and  I  think  larger  settlements 
have  been  made. 

Senator  Ferguson.  How  do  you  distinguish  between  the  $1,000  you 
are  talking  about  and  the  $20,000  that  has  been  paid  ? 

Mr.  Upham.  I  can't,  sir. 

Senator  Ferguson.  Has  there  ever  been  any  explanation  made  to 
you  ? 

Mr.  Upham.  No,  sir ;  I  can't  explain  it. 

Senator  Ferguson.  You  say  you  have  some  pictures.  Do  they  show 
the  damage? 

Mr.  Upham.  I  have  pictures  of  the  Poinsettia  Hotel,  for  example 
[showing  pictures].  This  is  the  shape  it  was  left  in.  I  offer  this  in 
my  capacity  in  representing  the  hotel  association. 

(The  document  referred  to  was  marked  "Exhibit  No.  929"  and  is 
included  in  the  appendix  on  p.  8962.) 

The  Acting  Chairman.  This  is  before  or  after  reconditioning? 

Mr.  Upham.  Well,  Senator,  I  think  two  are  after  reconditioning. 
Those  electric  light  fixtures  were  badly  treated. 

Mr.  Hallet.  Were  showers  installed  in  the  bathrooms  in  some  cases  ? 

Mr.  Upham.  I  don't  think  so.  I  haven't  heard  of  that.  I  know  in 
some  cases  the  boys  pulled  the  tubs  out  and  when  they  turned  on  the 
water  the  water  went  down  through  the  building. 

Mr.  Goheen.  In  our  hotel,  the  Beverly  Hotel,  the  boys  did  rip  out 
the  showers. 

Senator  Ferguson.  You  say  they  took  tubs  out? 

Mr.  Upham.  In  this  particular  hotel,  Senator.  There  was  one  occa- 
sion that  I  know  of  where  one  of  the  boys  pulled  the  tub  out  of  the  bath- 
room and  down  the  hall  he  went  with  another  boy  in  it  and  the  water 
that  came  out  of  the  pipes  went  down  on  the  ground  floor  and  spoiled 
the  night's  baking  in  our  leading  restaurant  on  Central  Avenue.  The 
customers  didn't  eat  that  day.    That,  of  course,  is  not 

Senator  Ferguson  (interposing).  You  have  a  list  of  figures  here. 
What  is  this? 

Mr.  Upham.  That  is  a  list  of  the  settlements  made  on  the  21  hotels 
which  are  unhappy  at  this  time.  They  totaled  $100,541.  Ultimate 
damage  was  estimated  at  $200,175.44. 

(The  document  referred  to  was  marked  "Exhibit  No.  930"  and  is 
included  in  the  appendix  on  p.  8963.) 

Senator  Ferguson.  Have  all  these  people  accepted  these  settlements? 

Mr.  Upham.  With  one  exception,  the  Royal  Palm,  and  we  are  hop- 
ing to  have  a  settlement. 

Senator  Ferguson.  I  will  put  a  question  mark  there  and  that  means 
not  accepted.     [Referring  to  document.] 

Mr.  Upham.  All  the  others  have  signed  releases  which  bars  them 
from  any  further  negotiations  with  the  War  Department. 

Senator  Ferguson.  Is  there  anyone  here  to  speak  for  those? 

Mr.  Upham.  I  represent  them. 

Senator  Ferguson.  You  can  state  as  to  why  they  made  settlements? 


8706     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 
BEVERLY  HOTEL,  ST.  PETERSBURG RELEASE  BY  ARMY 

Mr.  Goheen.  I  can  speak  for  the  Beverly  Hotel. 

(The  document  referred  to  was  marked  "Exhibit  No.  931"  and  is 
included  in  the  appendix  on  p.  8964.) 

Senator  Ferguson.  You  have  made  a  settlement,  and  will  you  tell  us 
why  you  made  it  ? 

Mr.  Goheen.  Yes,  sir.  Before  I  make  that  statement  I  will  hand  a 
complete  file  on  our  claims  and  the  basis  of  our  claims.  We  were  told 
that  we  either  had  to  take 

The  Acting  Chairman  (interposing).  Before  you  go  into  that,  has 
this  data  been  furnished  to  the  War  Department  or  any  representa- 
tive of  the  War  Departuient? 

Mr.  Goheen.  I  have  a  complete  set  here  for  the  War  Department  if 
they  want  it. 

Colonel  Knowles.  I  should  like  to  have  it.     Thank  you. 

Senator  Ferguson.  As  I  understand  it,  you  made  a  settlement  for 
$4,800  and  you  now  claim  your  damages  to  be  $11,503.88. 

Mr.  Goheen.  That's  right. 

Senator  Ferguson.  Has  that  already  been  expended  ? 

Mr.  Goheen.  Yes,  sir. 

Senator  Ferguson.  So  it  is  not  an  estimate.     It  is  actual  cost? 

Mr.  Goheen.  Yes,  sir ;  sworn  to. 

Senator  Ferguson.  Will  you  tell  us  why  you  settled  for  $4,800  ? 

Mr.  Goheen.  Because  we  were  under  duress,  either  to  take  the  money 
or  the  Government  would  move  in  and  do  it  their  way.  We  had  the 
experience  of  Upham's  hotel,  the  Royal  Palm,  and  we  didn't  want  it. 

Senator  Ferguson.  Had  you  seen  what  the  Government  had  done  at 
the  hotel  ? 

Mr.  Goheen.  No,  sir ;  he  told  me. 

Senator  Ferguson.  You  didn't  see  it  yourself? 

Mr.  Goheen.  No,  sir ;  I  didn't. 

Senator  Ferguson.  And  now  you  say  that  because  the  Government 
said  $4,800  or  they  would  do  it,  you  signed? 

Mr.  Goheen.  We  decided  it  was  the  lesser  of  two  evils  and  we'd  do  it 
ourselves. 

Senator  Ferguson.  Did  you  consult  counsel? 

Mr.  Goheen.  Yes ;  and  he  told  us  that  we  were  in  an  embarrassing 
position  in  that  it  would  take  lots  of  time  to  go  first  through  the  Court 
of  Claims,  if  our  claim  was  over  $10,000,  and  if  it  was  under  $10,000 
we  could  go  to  our  district  Federal  court  in  Tampa,  but  before  we  get 
up  to  the  place  of  settlement,  I  would  like  to  state  that  we  did  file  with 
the  then  Colonel  Fitch  our  estimate  of  the  claims.  We  have  produced 
evidence  of  that. 

Senator  Ferguson.  Before  you  made  the  settlement  ? 

Mr.  Goheen.  Yes,  sir. 

Senator  Ferguson.  What  was  that  estimate  ? 

Mr.  Goheen.  That  estimate  was  $8,600. 

Senator  Ferguson.  What  did  he  say  about  that  ? 

Mr.  Goheen.  They  just  told  us"  that  they  couldn't  settle  on  that 
basis. 

Senator  Ferguson.  Why? 

Mr.  Goheen.  They  said  it  was  too  much ;  that  part  of  that  damage 
was  ours. 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM     8707 

Senator  Ferguson.  What  part  was  yours  ? 

Mr.  Goheen.  He  told  us  that  we  had  a  certain  amount  of  mainte- 
nance there  that  we  had  to  stand  for  ourselves,  and  we  agreed  to  that, 
which  was  $700.  We  had  been  spending  from  $500  to  $750  annually 
inside,  but  because  the  Government  came  and  took  our  hotel  in  the 
summer  of  1942,  we  agreed  to  make  allowance  for  that  amount,  which 
we  have  set  up  on  our  statement  here.  They  then  told  us,  after  we 
refused  their  settlement,  that  we  had  better  go  and  get  a  contractor, 
and  we  went  and  got  a  contractor  and  he  met  my  figures. 

Senator  Ferguson.  After  you  accepted  ? 

Mr.  Goheen.  No,  sir ;  this  was  all  before. 

Mr.  Halley.  What  was  the  first  offer  made  by  the  Government  ? 

Mr.  Goheen.  The  first  offer  made  was  $3,000.  Before  we  left  that 
sitting  they  told  us  if  we  would  take  what  they  called  a  turnkey  settle- 
ment, meaning  turning  the  key  over  to  the  house,  they  would  increase 
it  to  $3,650.  We  refused  that  settlement  and  asked  if  we  couldn't  have 
some  time. 

Mr.  Halley.  Did  they  at  any  point  give  you  the  basis  for  their 
figures  ? 

Mr.  Goheen.  No,  sir. 

Mr.  Halley.  Did  you  ask  for  them  ? 

Mr.  Goheen.  We  asked  for  them  and  were  repeatedly  turned  down. 

Senator  Ferguson.  Why  did  they  turn  you  down?  Did  they  give 
you  a  reason  ? 

Mr.  Goheen.  Yes,  sir ;  it  was  a  military  secret. 

Mr.  Halley.  What  individual  said  that  ? 

Mr.  Goheen.  We  were  dealing  with  Colonel  Fitch  and  a  civilian 
representative,  Mr.  Ed  Busby,  who  is  now  deceased.  He  was  con- 
sidered the  senior  negotiator.  We  went,  following  this  session,  and 
consulted  our  attorney.  We  were  told  we  would  be  given  48  hours — 
no,  we  asked  for  48  hours  and  they  told  us  they  would  give  us  24  hours 
to  decide  whether  we  would  accept  the  turnkey  proposition  or  come 
back  with  a  counterproposition.  We  told  them  we  hadn't  any  counter- 
proposition;  that  we  had  our  figures  all  established.  The  next  time 
they  offered  us  $4,200,  which  meant  they  were  still  horse  trading  with 
us.  After  we  had  submited  a  licensed  contractor's  figures,  of  which  I 
have  produced  a  photostatic  copy,  my  associate  attempted  to  get  from 
Colonel  Fitch  the  break-down  of  his  figures,  and  in  a  meager  way  he 
got  some  commitment  from  him,  but  not  final  nor  total,  and  even  with 
the  total  figures  he  more  or  less  admitted  he  still  was  $1,800  short  of 
what  he  finally  offered,  and  said  that  would  be  the  last  figure. 

Senator  Ferguson.  When  did  you  change  your  mind  after  you  made 
a  settlement?     Had  you  legal  advice  to  make  it? 

Mr.  Goheen.  We  didn't  have  legal  advice  to  make  it.  They  never 
told  us  what  to  do. 

Senator  Ferguson.  You  said  you  consulted  a  lawyer. 

Mr.  Goheen.  Yes ;  and  he  told  us  we  were  in  an  embarrassing  posi- 
tion because  we  were  racing  against  time  to  get  the  hotel  reaay  for 
this  coming  season,  and  because  we  would  be  delayed. 

Senator  Ferguson.  When  did  you  change  your  mind  about  the 
settlement  ? 

Mr.  Goheen.  When  they  told  us  that  we  either  had  to  take  the 
$4,800  or  the  Government  had  men  ready  to  put  in  that  afternoon  or 
the  next  morning  to  do  it. 


8708     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Senator  Ferguson.  So  you  took  the  settlement.  When  did  you  start 
proceedings  ? 

Mr.  Goheen.  They  turned  possession  over.    We  negotiated. 

Senator  Ferguson.  When  did  you  decide  you  wanted  to  try  to  get 
more  money  ?     Is  that  what  you  are  here  for  ? 

Mr.  Goheen.  Yes,  sir.    We  feel  that 

Senator  Ferguson  (interposing).  When  did  you  decide  that? 

Mr.  Goheen.  We  knew  it  all  the  time  that  we  were  entitled  to  more 
money. 

Senator  Ferguson.  Then  you  had  in  mind  that  you  would  make 
the  settlement  and  that  then  you  would  start  after  that — after  you 
got  your  repairs  done — to  try  to  get  the  excess  ? 

Mr.  Goheen.  No,  sir ;  no,  sir.  We  know  all"  the  time,  and  we  told 
Colonel  Fitch  all  the  time,  that  we  could  not  make  our  restoration  on 
the  figures  that  he  had  offered  us. 

Senator  Ferguson.  Here  is  what  I  am  getting  at.  You  make  a 
settlement.     You  make  it  and  get  your  property  back. 

Mr.  Goheen.  Under  duress. 

Senator  Ferguson.  You  know  it  is  duress  while  you  are  making  it, 
and  when  do  you  decide  you  are  going  to  try  to  remedy  it? 

Mr.  Goheen.  We  decided  all  the  time  we  weren't  satisfied. 

Senator  Ferguson.  And  you  would  do  what  you  could  after  you  got 
the  property  back? 

Mr.  Goheen.  Yes,  sir. 

Senator  Ferguson.  Did  you  tell  Fitch  that  ? 

Mr.  Goheen.  Yes,  sir. 

Senator  Ferguson.  What  did  Fitch  say  about  that? 

Mr.  Goheen.  He  didn't  say  anything  about  that. 

Senator  Ferguson.  That  you  would  make  the  settlement  and  then 
start  proceedings  to  try  to  get  your  money  ? 

Mr.  Goheen.  No.  We  told  him  we  were  not  satisfied  with  his  set- 
tlement and  that  the  place  could  not  be  restored  for  the  amount  of 
money  that  he  offered  us. 

Senator  Ferguson.  But,  notwithstanding  that,  you  signed  ? 

Mr.  Goheen.  Yes,  sir;  because  we  were  told  we  had  to  do  one  of 
two  things :  Either  sign  or  else  have  the  Government  do  it.  They  told 
us  they  had  men  ready  to  put  in  our  hotel  that  afternoon  or  the  very 
next  morning,  and  as  I  stated  a  little  while  ago,  we  decided  on  the 
lesser  of  what  we  thought  were  two  evils,  or  the  lesser  of  two  losses. 

The  Acting  Chairman.  I  want  to  ask  you  a  question  here.  I  have 
this  estimate  here  by  E.  N.  Staples,  stating  that  Major  Fitch,  or 
Colonel  Fitch,  set  down  opposite  the  contractor's  estimate  of  the  item 
his  estimate  of  the  item.  The  first  item  the  contractor  estimated  was 
$1,004.40,  and  Major  Fitch  put  down  $620. 

Mr.  Goheen.  Those  are  my  associate's  figures.  All  the  time  we 
were  trying  to  get  from  the  then  Colonel  Fitch  his  break-down. 

The  Acting  Chairman.  What  did  your  associate  base  his  $620  on? 

Mr.  Goheen.  That  was  the  commitment  that  Major  Fitch  made  to 
him  that  their  engineering  department  had  estimated. 

Senator  Ferguson.  Those  were  the  military  secrets? 

Mr.  Goheen.  That's  right. 

The  Acting  Chairman.  Did  he  give  you  the  basis  for  that  $620? 

Mr.  Goheen.  No,  sir ;  he  did  not. 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8709 

The  Acting  Chairman.  At  any  place  did  he  give  you  any  basis  for 
those  figures? 

Mr.  Goheen.  No,  sir. 

The  Acting  Chairman.  I  notice  one  item,  one  of  $232  for  enameling 
woodwork  in  which  he  agrees  with  you,  and  one  for  $246  and  one  for 
$25,  in  which  he  appears  to  be  in  agreement. 

Mr.  Goheen.  That's  right.  That  means  our  contractor  wasn't  very 
far  away  from  their  engineer's  figures. 

The  Acting  Chairman.  Are  these  engineer's  figures  ? 

Mr.  Goheen.  He  didn't  tell  us  whose  figures  they  were.  I  said  we 
were  all  the  time  trying  to  get  these  figures  broken  down.  We  were 
trying  to  break  down  this  military  secret,  because  we  didn't  think  it 
was  a  military  secret. 

Senator  Ferguson.  Did  you  tell  him  that  ? 

Mr.  Goheen.  Yes,  sir. 

The  Acting  Chairman.  Did  he  give  you  an  indication  of  what  he 
seemed  to  base  this  on  ? 

Mr.  Goheen.  No,  sir ;  he  did  not. 

Senator  Ferguson.  Did  you  ask  him  to  explain  what  the  military 
secret  was? 

Mr.  Goheen.  I  heard  that  statement  so  often  that 

Senator  Ferguson  (interposing).  Was  it  in  the  figure  or  how  they 
arrived  at  the  figure  that  the  military  secret  was  involved  ? 

Mr.  Goheen.  The  only  thing  I  can  say,  Senator,  is  that  any  time  I 
had  dealings  with  Colonel  Fitch  he  sat  back  and  figured  like  this 
[indicating].  When  we  went  to  him  the  first  time  we  threw  the 
figures  I  had  prepared  on  his  desk  without  question,  and  then  we 
asked  him  to  compare  his  figures  with  ours.  When  these  figures  were 
presented,  that  is  when  they  offered  us  $3,000,  and  before  we  left  that 
hearing  we  were  raised  to  $3,650  if  we  would  take  it  immediately,  and 
that  is  when  we  turned  it  down.  Two  days  later  they  called  us  back 
and  they  said,  "We  found  some  adjustment  in  our  figures,"  and  they 
increased  it  to  $4,200  and  we  still  turned  it  down.  We  still  asked  for  a 
break-down  of  their  figures.  We  were  trying  to  see  whether  we  were 
wrong  and  it  was  at  the  second  hearing  that  they  suggested  that  we 
get  this  particular  contractor  to  turn  his  figures  in.  They  thought 
perhaps  we  weren't  figuring  correctly. 

The  Acting  Chairman.  They  selected  the  contractor  ? 

Mr.  Goheen.  They  suggested  him. 

Mr.  Upham.  They  used  him  frequently,  Senator,  during  the  negotia- 
tions with  the  Army. 

Senator  Ferguson.  So  you  went  to  the  contractor  they  had  used? 

Mr.  Goheen.  That  they  had  suggested ;  yes,  sir. 
Senator  Ferguson.  But  they  didn't  take  his  figures  ? 
Mr.  Goheen.  They  didn't  take  his  figures ;  no,  sir. 

ACQUISITION  AND  RELEASE  OF  ST.  PETERSBURG  HOTELS  BY  ARMY 

Mr.  Upham.  Along  that  line,  I  might  say,  Senator,  that  Colonel 
Fitch  repeatedly  made  the  statement  to  me — and  incidentally  I  set- 
tled two  or  three  other  hotels  with  his  office.  He  would  ask  me  if  I 
knew  that  a  certain  hotel  man  in  St.  Petersburg  had,  during  the  month 
of  May,  refinished  some  of  his  hotel  rooms,  two  coats  of  oil  paint  for 


8710     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

a  total  of  $18.  I  told  him  I  didn't  know  of  that  and  I  didn't  believe 
it  could  be  true,  and  who  was  it.  He  said  that  was  a  military  secret 
and  yet  I  know  the  average  cost  would  be  $30  or  better  in  St.  Peters- 
burg.   We  still  don't  know  who  it  was. 

Senator  Ferguson.  Would  you  say  these  settlements  are  typical  of 
the  others  you  made  ? 

Mr.  Upham.  I  made  one  settlement,  $7,250  for  a  72-room  hotel,  it 
is  not  in  the  list  there  because  it  comes  close  to  covering  their 
expenses. 

Senator  Ferguson.  How  do  you  account  for  that  settlement  ? 

Mr.  Upham.  I  don't  know.  I  never  have  known.  The  contractor 
put  in  his  figures  and  I  guess  by  that  time  Fitch  wasn't  going  to  cut 
down  too  much,  but  he"  still  insisted,  in  spite  of  the  fact  that  he  had 
told  us  that  the  properties  would  be  returned  in  good  or  better  con- 
dition, the  owner  would  have  to  bear  part  of  the  damages,  and  in 
this  case  the  owners  have  borne  about  $1,500  and  are  not  protesting. 

Senator  Ferguson.  Did  he  tell  you  the  percentage  the  owner  would 
have  to  stand? 

Mr.  Upham.  At  the  beginning  of  the  lease  negotiations,  the  owner 
was  not  to  stand  anything. 

Senator  Ferguson.  But  when  you  got  through? 

Mr.  Upham.  Oh,  no ;  he  didn't  come  out  with  any  amount.  It  would 
depend  on  the  age  of  the  building.  If  he  thought  the  building  was 
old — older  buildings,  incidentally,  require  more  maintenance  and  re- 
pair than  a  newer  building — but  he  apparently  figured  the  owner 
should  stand  more. 

Senator  Ferguson.  What  are  these  checks  for,  "ES"? 

Mr.  Upham.  Estimates ;  the  others  are  actual  costs.  In  other  words, 
some  of  those  owners  haven't  had  enough  money  to  complete  their 
work  and  they  have  had  to  throw  in  estimates  of  what  they  will  have 
to  do  either  next  summer  or  whenever  they  can  get  enough  money 
to  do  it. 

Mr.  Halley.  Do  you  or  any  of  the  owners  whom  you  represent,  Mr. 
Upham,  have  any  statement  with  respect  to  original  rent  and  the 
amount  of  rents  ?     Do  you  consider  that  satisfactory  ? 

Mr.  Upham.  We  do  not  consider  that  satisfactory,  as  I  say.  The 
per-man  figures  in  St.  Petersburg  are  $58  a  room,  and  that  runs  about 
60  percent  of  what  the  hotels  normally  received  in  previous  years  out 
of  their  business.1 

Senator  Ferguson.  You  mean  net? 

Mr.  Upham.  Their  net  operating  profit.  In  our  case  the  net  op- 
erating profit  for  5  years  averaged  better  than  $20,000.  We  got  $12,500. 
That  is  about  the  case  in  practically  all  of  the  hotels. 

Senator  Ferguson.  This  figure  does  not  mean  much  when  you  say 
$119  to  $58.  It  all  depends  on  what  is  normal.  You  said  General 
Arnold  said  it  was  $119  per  man  in  Miami  Beach  and  $58  in  St. 
Petersburg. 

Mr.  Upham.  Yes,  sir. 

Senator  Ferguson.  Normally,  it  costs  much  more  money  to  be  at 
Miami  Beach  than  it  does  to  be  at  St.  Petersburg. 

Mr.  Upham.  Senator,  does  it  cost  any  more  to  house  a  man  with 
four  walls? 


1  In  this  connection  sec  Exhibit  No.  025,  appendix,  p.  8954. 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM     8711 

Senator  Ferguson.  But  that  is  normally  true,  isn't  it? 

Mr.  Upham.  Because  maybe  the  hotel  owners  over  here  take  advant- 
age of  the  glamor.     Our  people  are  older. 

The  Acting  Chairman.  No.  What  he  is  getting  at  is  that  compara- 
tive figure  on  the  building  valuation  may  reflect  in  there. 

Mr.  Upham.  Yes. 

Senator  Ferguson.  Isn't  it  true  in  norma)  times  that  it  costs  twice 
as  much  to  live  at  Miami  Beach  in  the  winter,  during  the  season,  than 
it  does  to  live  at  St.  Petersburg  ? 

Mr.  Upham.  That's  true,  but  does  the  building  cost  more  ?  Should 
we  pay  because  they  take  advantage  of  the  people  ? 

(Off  the  record.) 

Mr.  Halley.  What  do  you  know  of  the  negotiations?  How  were 
they  conducted  ? 

Mr.  Upham.  The  settlement  negotiations  ? 

Mr.  Halley.  The  negotiations  for  the  original  renting. 

Mr.  Upham.  Oh,  as  low  a  basis  as  Colonel  Fitch  could  make. 

Mr.  Halley.  Was  any  pressure  brought  to  bear,  to  your  knowledge? 

Mr.  Upham.  Brought  by  the  citizens ;  yes ;  by  citizens  of  the  city. 

Mr.  Halley.  Were  any  of  the  hotel  owners  told  their  property  would 
be  roped  off  and  unaccessible  ? 

Mr.  Upham.  Yes,  sir. 

Mr.  Halley.  Who  were  they  ? 

Mr.  Upham.  The  Allison  Hotel,  for  one,  the  Stanton  Hotel,  for  an- 
other. I  wasn't  told  that  because  I  optioned  the  Royal  Palm  early  in 
the  game,  but  I  know  those  hotels  definitely  were. 

(The  documents  referred  to  were  marked  "Exhibits  Nos.  932  and 
933"  and  are  included  in  the  appendix  on  pp.  8985  and  8986.) 

Mr.  Halley.  That  their  hotels  would  be  made  inaccessible  to  the 
public  ? 

Mr.  Upham.  That  their  customers  couldn't  drive  up  to  the  hotels. 

Mr.  Halley.  Do  you  know  of  any  that  actually  was  roped  off  ? 

Mr.  Upham.  Yes,  sir;  the  Alida  and  the  Gotham  Hotels  were  not 
occupied  by  the  Army  and  the  entire  block  in  front  of  those  hotels  was 
blocked  off — roped  off. 

Senator  Ferguson.  They  never  were  occupied  by  the  Army? 

Mr.  Upham.  They  occupied  a  building  next  to  the  hotels. 

Senator  Ferguson.  But  the  hotels  were  never  occupied  or  leased 
by  the  Government? 

Mr.  Upham.  No,  sir. 

Senator  Ferguson.  Did  the  Government  cut  off  access  to  those  hotels  ? 

Mr.  Upham.  Yes,  sir ;  not  foot  access,  but  automobile. 

The  Acting  Chairman.  Did  the  city  permit  them  to  do  that  ?  They 
couldn't  put  the  city  under  martial  law.     The  Army  can't  take  a  street. 

Mr.  Upham.  When  they  go  out  and  hang  up  a  rope  well 

The  Acting  Chairman.  What  was  your  police  force  doing? 

Mr.  Upham.  They  were  cooperating  with  the  Army,  sir.  That  was 
done  in  that  case.  That  was  voluntary.  But  it  was  a  threat  in  the 
first  place. 

Senator  Ferguson.  Your  city  officials  voluntarily  surrender  and  now 
you  come  and  ask  the  committee  to  say  you  shouldn't  have  voluntarily 
surrendered. 


8712     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

Mr.  Upham.  We  didn't  object  to  that;  I  don't  think  the  hotels 
did,  but  that  was  used  as  a  threat  in  getting  the  hotel  owners  to 
lease  their  property  at  less  money  than  they  thought  they  should 
have. 

Senator  Ferguson.  Did  Fitch  tell  you  that? 

Mr.  Upham.  Mr.  Frazure;  John  Frazure. 

Senator  Ferguson.  Who  is  he  ? 

Mr.  Upham.  A  resident  of  Miami  Beach.  He  negotiated  a  great 
many  leases  in  St.  Petersburg.     He  told  people  that. 

Senator  Ferguson.  What  did  he  tell  you  ? 

Mr.  Upham.  He  didn't  tell  me,  sir,  because  I  was  an  early  one  to 
sign  up.  I  think  I  have  an  affidavit  here  covering  that  from  Mr. 
Dugan,  who  is  part  owner  of  the  Dusenbury  Hotel  and  the  Randolph 
Hotel,  and  he  says : 

Upon  being  enlightened  by  the  Army's  representative,  Lt.  Col.  David  Fitch, 
of  the  problems  which  would  certainly  confront  us  the  coming  season  if  we 
did  not  sign  up  with  the  Army  and  at  the  Army's  figure,  such  as  (1)  the  block- 
ing off  of  streets  adjacent  to  or  near  our  hotel,  thereby  interfering  with  the 
easy  egress  and  ingress  of  guests,  (2)  the  early  blowing  of  bugles  and  noises 
of  marching  soldiers  very  early  in  the  morning,  (3)  the  very  strict  restricting 
of  the  traveling  public  by  train  or  bus  into  Florida,  and  (4)  the  possibility 
that  the  turning  of  St.  Petersburg  into  an  Army  replacement  center  would  be 
a  discouraging  feature  as  an  entertainment  to  tourists  to  spend  their  vacation 
in  St.  Petersburg,  we  felt  that  the  picture  was  so  black  that  we  agreed  to  sign 
at  their  figure. 

(The  document  referred  to  was  marked  "Exhibit  No.  934"  and  is 
included  in  the  appendix  on  p.  8987.) 

Senator  Ferguson.  Some  of  those  are  actually  true. 

The  Acting  Chairman.  And  legitimate. 

Senator  Ferguson.  That  the  people  couldn't  get  there  and  the  fact 
that  they  would  be  out  on  the  street  training  troops. 

The  Acting  Chairman.  And  blowing  bugles. 

Senator  Ferguson.  Those  are  accurate.  There  is  no  threat  in 
that. 

Mr.  Upham.  There  isn't  any  threat  in  that.  Perhaps  the  facts 
wouldn't  have  hurt,  but  it  was  the  way  they  were  used.  I  think  the 
threat  to  rope  off  a  street  is  a  serious  one. 

Senator  Ferguson.  But  doesn't  the  owner  know  that  they  can't  do 
it  under  normal  conditions? 

Mr.  Upham.  We  have  a  number  of  hotels  owned  by  women ;  women 
don't  know  these  things. 

Senator  Ferguson.  You  are  the  representative  of  some  of  these 
people  ? 

Mr.  Upham.  Yes,  sir. 

Senator  Ferguson.  How  do  you  account  for  it  ? 

Mr.  Upham.  There  was  a  feeling  they  should  cooperate  with  the 
Government.  They  all  went  up  and  offered  their  properties  on  some 
basis,  but  were  then  told  they  could  not  have  the  rent  they  asked  for, 
and  they  had  to  take  such  and  such  rates.  They  were  told  that  on 
several  occasions.  People  went  back  several  times  and  asked  for  more 
and  they  were  told  these  things  about  the  need  of  their  property  and 
how  they  wouldn't  make  anything,  probably  starve  to  death  if  they 
didn't  take  what  the  Government  offered  them. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8713 

Senator  Ferguson.  Normally  that  would  have  been  true,  that  they 
wouldn't  have  gotten  anything  out  of  it  if  people  couldn't  have  gotten 
down  here.     Isn't  that  true? 

Mr.  Upham.  Normally,  if  people  couldn't  have  gotten  down  here; 
yes. 

Senator  Ferguson.  Did  you  have  gasoline  rationing  there  ? 

Mr.  Upham.  We  had  gas  rationing,  sir,  the  same  as  the  eastern 
seaboard. 

Senator  Ferguson.  But  Miami  didn't.  How  do  you  account  for 
that  ? 

Mr.  Upham.  I  think  Miami  has  had  the  same  rationing  that  we 
have  had,  but  I  think  what  Mr.  DuPree  meant  was  that  the  O.  P.  A. 
tightened  up  in  certain  States  in  the  East  for  certain  periods  before 
others. 

Senator  Ferguson.  You  never  had  "no  pleasure  driving?" 

Mr.  Upham.  We  had  a  number  of  people  who  came  last  year  by  au- 
tomobile. 

Senator  Ferguson.  But  in  the  town  were  you  allowed  pleasure 
driving  ? 

Mr.  Upham.  The  holders  of  A  cards  have  been  up  until  recently. 
The  O.  P.  A.  said  a  man  who  had  an  A  card  could  go  hunting  if 
he  saved  his  gas. 

Senator  Ferguson.  Then  you  had  no  ban  on  pleasure  driving? 

Mr.  Upham.  No,  sir;  no,  sir;  but  in  the  case  of  the  Dus'enbury 
Hotel,  he  leased  it  to  the  Army  and  at  the  time  he  had  100-percent 
reservations  for  the  following  year.  Most  of  those  people  were  in 
St.  Petersburg  in  the  fall  and  would  have  come  back. 

Senator  Ferguson.  You  say  he  had  it  leased  but  he  voluntarily 
took  much  less  money  ? 

Mr.  Upham.  That's  right,  sir. 

Senator  Ferguson.  How  much  less  ? 

Mr.  Upham.  $11,500. 

Senator  Ferguson.  Less  ? 

Mr.  Upham.  No  ;  that  was  the  rental. 

Senator  Ferguson.  Was  that  over  and  above 

Mr.  Upham  (interposing).  His  normal  earnings,  in  the  previous 
season,  were  $18,524— that  was  1940-41,  and  in  1940-42,  it  was  $i  2,000. 

Senator  Ferguson.  Could  this  be  true :  That  the  people  there,  the 
war  being  on,  decided  they  weren't  going  to  be  able  to  get  the  normal 
traffic,  the  normal  tourists,  and  therefore  they  decided  it  would  be  a 
good  thing  for  them  if  they  could  get  the  Government  to  take  over 
their  buildings  and  occupy  them  during  a  time  when  we  were  at  war? 
Is  that  true  ? 

Mr.  Upham.  Personally,  I  felt  that  it  would  be.  We  were  told  that 
these  properties  would  be  occupied  for  the  duration,  not  for  12  months. 

Senator  Ferguson.  Of  course,  you  knew  that  no  particular  assur- 
ance would  be  given  that  they  would  be  occupied  for  the  duration,  be- 
cause the  Army  moves.  It  is  compelled  to  move.  Why  would  you 
believe  that  statement  that  it  would  be  occupied  for  the  duration,  when 
you  know  that  camps  are  abandoned  as  the  Army  moves  ? 

Mr.  Upham.  Well,  perhaps  we  didn't  do  much  thinking. 

311932 — 44 — pt.  21 14 


8714     INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM 

Senator  Ferguson.  You  didn't  do  much  thinking;  that's  about  it 
and  you  were  a  little  panicky  on  the  prospect  of  not  getting  tourists ; 
isn't  that  right  ? 

Mr.  Upham.  We  felt  the  Government  wanted  those  properties.  We 
didn't  know  what  the  tourist  season  would  be.  We  felt  we  would  be 
doing  a  service  to  the  community  and  to  the  country  if  we  leased  them. 

Senator  Ferguson.  Why  do  you  change  your  mind  now?  It  was 
patriotism  one  day ;  what  is  it  today  ? 

Mr.  Upham.  We  haven't  changed  our  minds  about  being  unhappy 
about  the  rents.    We  have  been  unhappy  about  it  since  the  beginning. 

Senator  Ferguson.  You  were  more  unhappy  about  the  settlements 
made  for  the  destruction  of  your  property? 

Mr.  Upham.  Yes,  sir ;  particularly  since  our  rents  provided  for  the 
properties,  on  Colonel  Fitch's  say-so,  to  be  returned  in  as  good  shape 
as  when  they  got  them. 

Senator  Ferguson.  So  your  chief  complaint  now  simmers  down  to 
the  question  that  you  are  not  getting  them  back  in  as  good  condition, 
and  if  the  Army  did  give  them  back,  they  would  be  in  worse  condition  ? 

Mr.  Upham.  No,  sir;  not  altogether.  They  restored  the  Princess 
Martha  and  the  Carle ve  Hotels  in  St.  Petersburg  and  the  job  was  very 
well  done.  There  is  no  comparison  between  the  jobs  done  there  and 
the  job  done  at  the  Royal  Palm. 

Senator  Ferguson.  What  about  your  claim? 

Mr.  Goheen.  Don't  forget  they  made  the  proposition  with  us  shortly 
after  they  had  been  to  Mr.  Upham's  hotel.  There  has  been  a  space  of 
time  elapsed.  The  Princess  Martha  isn't  finished  yet,  and  the  Army 
is  doing  a  better  job  today  than  when  they  talked  to  us  and  Mr. 
Upham's  was  the  hotel  they  first  negotiated  for,  and  his  was  the  one 
they  used  as  a  guinea  pig  and  the  guinea  pig  didn't  seem  to  measure  up 
to  our  specifications  and  desire. 

Mr.  Upham.  You  asked  me  how  many  of  these  people  were  in- 
fluenced by  this  restoration  done  in  the  Royal  Palm  Hotel. 

Senator  Ferguson.  Will  you  leave  those  with  the  committee  ?  [Re- 
ferring to  document.] 

(The  documents  referred  to  were  marked  "Exhibits  Nos.  935  to  938" 
and  are  included  in  the  appendix  on  pp.  8991-8993.) 

Mr.  Upham.  Yes,  sir ;  and  those  bear  out  what  Mr.  Goheen  has  told 
you.  I  think  Mr.  Goheen  will  tell  you  that  the  job  they  did  at  the 
Royal  Palm  was  so  terrible  that 

Senator  Ferguson  (interposing).  But  they  never  offered  to  come 
back  and  redo  it  ? 

Mr.  Upham.  The  Government  would  be  very  lax  if  it  permitted 
Army  officers  to  encourage  claims  against  the  Government  and  the 
Government  could  not  come  to  us;  it's  my  place  to  go  to  it.  I  have 
been  to  the  Government  and  the  War  Department  has  been  very  co- 
operative. The  War  Department  still  insists  we  are  to  pay  at  least  a 
portion  of  our  Army  damage  on  the  basis  that  we  would  spend  so  much 
money  each  year  anyway.    In  contrast  to  that 

Senator  Ferguson  (interposing).     Isn't  there  something  to  that? 

Mr.  Upham.  It  would  be  if  we  had  been  allowed  to  figure  that  in 
our  rental,  but  we  were  told  that  would  not  be  necessary.  We  couldn't 
figure  it  in  our  rentals  and  the  rentals  were  based  on  that  premise,  sir. 

Senator  Ferguson.  How  much  does  that  amount  to? 


INVESTIGATION   OF   THE    NATIONAL    DEFENSE   PROGRAM     8715 

Mr.  Upham.  Your  question,  sir,  would  apply  to  the  Eoyal  Palm 
only? 

Senator  Ferguson.  Yes. 

Mr.  Upham.  They  haven't  told  me  what  they  could  do.  They  would 
be  very  foolish  to  tell  me  what  a  board  of  claims  that  hasn't  even  sat 
on  a  case  would  tell  me. 

Senator  Ferguson.  Is  there  anything  to  prevent  the  Army  from  go- 
ing over  there  today  and  putting  a  contractor  in  to  repair  it  % 

Mr.  Upham.  It  is  all  done.    We  have  redone  it  completely. 

Senator  Ferguson.  Could  it  have  been  done  2 

Mr.  Upham.  I  complained ;  I  refused  to  make  a  settlement. 

Senator  Ferguson.  After  you  made  the  settlement,  did  you  go  ahead 
and  do  the  work  without  further  complaint  ? 

Mr.  Upham.  I  never  made  a  settlement.  They  mailed  the  keys  to 
me  and  I  protested  the  condition.  They  wanted  me  to  sign  a  release 
and  I  declined  to  do  so. 

Senator  Ferguson.  Getting  down  to  the  Beverly,  when  did  you  do 
this  work  ?  Did  you  protest  after  they  did  your  work  ?  You  said  the 
Beverly  was  poorly  done  % 

Mr.  Upham.  No  ;  the  Royal  Palm  was  poorly  done. 

Senator  Ferguson.  I  see.  That  is  the  one  where  they  gave  you  the 
oil? 

Mr.  Upham.  They  just  left  the  oil.    They  didn't  leave  much  else. 

Mr.  Hallet.  Was  there  any  contention  on  the  part  of  the  owners 
in  St.  Petersburg  that  their  leases  were  canceled  after  less  than  a  year 
had  run  ?    Was  that  one  of  the  points  that  you  people  are  making? 

Mr.  Upham.  We  were  told  our  leases  were  to  run  for  a  longer  period 
than  just  1  year,  and  of  course  all  the  damage  occurred  in  the  first  12 
months.  No  more  damage  would  accrue,  probably,  to  the  furniture  if 
the  Army  were  in  a  longer  period. 

Mr.  Hallet.  You  make  the  point  that  the  longer  the  lease  the  less 
proportionate  damage  per  year. 

Mr.  Upham.  I  told  Fitch  if  the  Army  occupied  the  Eoyal  Palm  1 
year  we  would  have  $1,000  in  the  bank  to  meet  contingencies ;  if  they 
were  in  there  3  years  we  would  have  $3,000.  I  asked  him  to  step  the 
rent  up  the  first  year  and  down  the  second,  but  the  slim  margin  did 
cost  us,  in  every  case,  money. 

Mr.  Hallet.  At  the  time  you  signed  your  leases  you  knew  there  was 
a  30-day  cancelation  clause  in  them  ? 

Mr.  Upham.  We  were  told  it  was  customary  in  the  leases.  We 
didn't  see  the  leases  until  after  the  Army  was  in  the  properties. 

Mr.  Hallet.  Did  you  understand  about  the  30-day  cancelation  at 
the  time  you  signed  your  option  agreement  ? 

Mr.  Upham.  I  don't  remember  the  point  coming  up. 

Senator  Ferguson.  Do  you  have  a  copy  of  your  option  ? 

Mr.  Goheen.  Yes. 

Senator  Ferguson.  It  provides  for  the  30-day  cancelation  ? 

Mr.  Goheen.  Yes,  sir ;  I  have  a  copy  of  it  here ;  yes,  sir,  and  copy  of 
the  option  to  purchase. 

Senator  Pepper.  Mr.  Upham,  the  point  of  disagreement,  then,  be- 
tween you  and  the  Army  essentially  is  over  the  amount  of  the  damage 
done  during  the  occupancy  of  your  hotel  ? 

Mr.  Upham.  I  might  say,  Senator,  that  the  difference  of  opinion 
between  myself  and  the  Army  at  the  present  time  is  how  much  of  the 


8716     INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM 

eight  or  nine  thousand  dollars  of  damages  is  properly  ours  and  how 
much  is  properly  the  Army's  on  the  basis  that  we,  as  owners,  should 
assume  part  of  that  as  ordinary  wear  and  tear. 

Senator  Pepper.  What  did  the  Army  authorities  suggest  as  to  the 
way  the  disagreement  between  you  and  them  should  be  settled  ? 

Mr.  Upham.  The  suggestion  is  that  I  should  file  a  claim  at  this  time. 
That  will  be  referred  to  a  board  of  claims,  made  up  of  three  officers. 

Senator  Pepper.  All  of  them  Army  officers  ? 

Mr.  Upham.  I  think  I  am  correct  on  that. 

Col.  John  J.  O'Brien.  That's  right ;  the  usual  Army  claims  board. 

Senator  Pepper.  They  didn't  propose  setting  up  a  tribunal  or  board 
of  arbitration  that  might  be  disinterested  between  you  and  the  Army ; 
I  mean  disinterested  in  the  sense  that  they  wouldn't  be  representative 
of  either  of  you,  but  there  might  be  one  from  the  Army,  one  from  you, 
and  an  umpire  properly  selected. 

Mr.  Upham.  We  suggested  that,  but  it  is  my  understanding  that  the 
statutes  prevent  that.  I  have  a  letter  from  Mr.  Patterson  that  that  is 
illegal. 

Senator  Pepper.  You  have  been  informed  by  the  Office  of  the  Under 
Secretary  of  War  that  it  is  illegal  for  any  such  board  of  arbitration  to 
be  set  up  ? 

Mr.  Upham.  That's  right ;  yes,  sir. 

Senator  Pepper.  Did  the  Army  authorities  say  that  for  you  to  take 
advantage  of  their  offer  to  submit  the  matter  to  that  regular  Army 
board  you  would  have  to  agree  to  be  bound  by  their  decision  ? 

Mr.  Upham.  I  think  the  procedure  is  that  if  the  board  is  to  pass  that 
claim  on  to  the  Comptroller  General's  office,  the  Comptroller  himself 
will  not  agree  to  review  what  the  board  of  claims  finds  unless  we  agree 
to  sign  off  and  accept  their  findings. 

Senator  Pepper.  If  you  don't  apply,  then,  to  this  board  for  an 
adjustment  of  the  difference,  you  are  left  only  to  your  legal  remedies? 

Mr.  Upham.  That's  right. 

Senator  Pepper.  To  apply  to  the  Court  of  Claims  for  adjustment  of 
your  dispute  or  try  to  get  some  legislative  relief  ? 

Mr.  Upham.  That's  right. 

Senator  Ferguson.  But  some  claims  have  been  satisfactorily  adjusted 
up  to  $20,000? 

Mr.  Upham.  Yes,  sir;  or  so  nearly  satisfactory,  Senator,  that  no 
complaint  is  being  made. 

Senator  Ferguson.  Do  you  gentlemen  have  anything  else  to  add  to 
the  record  % 

BEVERLY  HOTEL,  ST.  PETERSBURG — ACQUISITION  BY  ARMY 

Mr.  Goheen.  I  would  like  to  go  back  to  the  leasing  of  the  hotel,  if  I 
may.  It  so  happened  that  when  the  Army  moved  into  St.  Petersburg 
the  office  personnel  moved  into  the  same  office  building  and  on  the  same 
floor  that  I  occupied  at  that  time.  I  was  one  of  the  first  ones  to  turn 
over  the  option  of  three  hotels;  the  Beverly  was  finally  accepted. 

Senator  Ferguson.  Let  me  get  a  little  more  on  this  option.  Did  you 
personally  negotiate  the  options? 

Mr.  Goheen.  Yes,  sir ;  I  did. 

Senator  Ferguson.  And  Colonel  Fitch  didn't  negotiate  those  ? 

Mr.  Goheen.  Yes,  sir ;  he  was  the  one  that  I  negotiated  with. 


INVESTIGATION   OF   THE   NATIONAL    DEFENSE   PROGRAM     8717 

Senator  Ferguson.  I  mean  you  represented- 


Mr.  Goheen.  I  was  one  of  the  owners.  My  partner  was  in  the 
north  at  the  time. 

Senator  Ferguson.  Was  it  stated  at  that  time  that  they  wouldn't 
come  in  unless  they  could  get  so  many  rooms? 

Mr.  Goheen.  Yes. 

Senator  Ferguson.  Why  were  they  taking  options  ? 

Mr.  Goheen.  To  find  out  if  they  could  get  a  set-up  in  St.  Peters- 
burg. The  hotel  men,  I  think  from  a  patriotic  standpoint,  rallied  to 
the  call.  I  know  I  did.  I  was  one  of  the  very  first  ones  to  turn  in 
three  hotels. 

Senator  Ferguson.  And  at  that  time  the  price  was  satisfactory  ? 

Mr.  Goheen.  No  price  was  considered. 

Senator  Ferguson.  But  the  option  gave  the  prices  ? 

Mr.  Goheen.  It  was  a  questionnaire  we  first  filled  in,  meaning, 
"What  have  you  got  to  offer?'  What  are  your  State  and  county  taxes? 
What  are  your  liabilities?  What  are  your  city  taxes?  How  much- 
mortage  do  you  owe?"  In  other  words,  that  was  the  first  question- 
naire that  was  filled  in,  and  another  question  was,  "What  rent  do 
you  think  you  should  get?"  In  the  case  of  the  hotel  which  was  finally 
taken,  we  asked  for  $20,000.  Colonel  Fitch  just  laughed  at  me  and 
said,  "Wiry,  we  can't  pay  you  any  rent  like  that."  I  said,  "Well, 
Colonel  Fitch,  this  hotel  has  been  producing  around  $28,000  for  a  7y2 
months'  season  operation  from  tourists."  He  said,  "This  is  the  Army. 
We  can't  pay  prices  like  that."     So  he  offered  me  first  $8,500. 

Senator  Ferguson.  You  knew  that  to  be  a  fact;  that  it  was  the 
Army  and  to  bring  a  man  down  here — a  boy — and  train  him  is  a 
lot  different  from  a  boy  coming  down  personally  as  a  tourist  for 
pleasure  ? 

Mr.  Goheen.  That  is  correct ;  yes.  But  I  am  leading  up  to  where 
we  think  the  rent  was  inadequate  and  why  he  offered  $8,500  first,  and 
I  said,  "What  yardstick  are  you  using?"  He  said,  "I  am  using  the 
yardstick  of  your  State  and  county  valuation."  I  said,  "What's  your 
percentage?"  He  said,  "You  can  figure  it  out  for  yourself."  I  said, 
"Well,  it  looks  to  me  as  though  it's  less  than  10  percent.  How  many 
boys  are  you  going  to  put  in  that  hotel  ?  We  are  talking  about  how 
many  you  are  going  to  accommodate."  He  said,  "I  don't  know.  We 
will  have  to  find  out  how  many  we  can  accommodate.  It  will  take  60 
square  feet  per  boy."     I  said,  "Fine.     Let's  go  and  make  a  survey." 

Before  we  made  the  survey,  he  asked  if  I  was  coming  down  to  sign 
the  options.  He  was  trying  to  get  options  after  the  questionnaire.  I 
said,  "Major,  my  partner  says  we  can't  sign  options  at  your  $8500." 
He  said,  "You  come  in  my  office  and  see  if  we  can  do  any  better."  So 
he  came  in  and  said  "$9,700."  I  was  not  satisfied  and  neither  was  my 
partner.  So  he  designated  Mr.  John  Frazure,  who  was  the  senior 
negotiator,  to  go  with  me  to  the  Beverly  Hotel,  and  we  made  a  survey 
and  it  was  after  the  survey  was  made  that  he  said  "This  will  take  care 
of  185  or  168  men,"  and  I  said,  "That's  about  40  more  than  we  accom- 
modate normally  in  tourist  business."  They  were  going  to  double  up 
to  some  extent. 

I  am  going  a  little  ahead  of  my  story.  I  was  called  to  go  there  in 
March  1942,  with  a  fire  inspector,  to  inspect  four  storerooms  which 
we  had  been  permitted  to  put  furniture  in.     We  made  the  inspection 


8718     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

and  I  happened  to  notice  one  room  that  their  Mr.  Frazure  said  would 
accommodate  three  boys,  because  it  has  only  one  window.  There  were 
five  double-deck  beds  in  that  room.  I  went  down  to  the  desk  and  I 
asked  the  officer  in  charge,  who  was  a  corporal — I  don't  know  his 
name — if  there  were  10  boys  in  this  particular  room  and  he  said, 
"Yes."  In  other  words,  instead  of  accommodating  165  boys  in  Feb- 
ruary and  March,  they  accommodated  475  to  500  boys  in  that  hotel. 

I  am  getting  a  little  ahead  of  my  story,  so  I  will  go  back  and  say 
that  we  felt  we  should  be  paid  on  the  basis  of  boys  served,  rather  than 
space  given,  and  he  didn't  see  fit  to  do  it  on  that  basis.  He  told  me  it 
was  based  on  our  State  and  county  valuation.  He  further  stated  that 
if  I  would  increase  my  valuation  under  affidavit — that  is,  to  the  State 
tax  assessor— he  would  increase  my  rental.  I  said,  "Major  Fitch,  I 
am  not  that  foolish." 

Senator  Ferguson.  Does  your  constitution  down  here  provide  that 
the  assessment  shall  be  the  actual  cash  value  ? 

Mr.  Goheen.  There  was  a  law  passed  here  in  1941  that  our  State 
and  county  should  assess  on  100  percent  valuation.  That  was  brought 
about  because  of  homestead  exemption. 

Senator  Ferguson.  So  he  was  going  on  that  basis  ? 

Mr.  Goheen.  That  is  correct. 

Mr.  Upham.  On  a  notoriously  poor  county  assessment  valuation 
set-up. 

Senator  Ferguson.  In  other  words,  you  would  say  the  assessor  is 
violating  his  oath  of  office  ? 

Mr.  Upham.  He  is  honest  in  every  other  particular,  sir. 

Mr.  Goheen.  I  will  inject  here  that  there  are  other  factors  that 
enter  into  it.  I  think  the  physical  condition  of  the  property  is  impor- 
tant. If  I  have  a  $10,000  property  and  I  don't  maintain  it,  it  goes 
down  to  no  value ;  if  I  have  a  $10,000  property  and  I  keep  it  up,  I  still 
have  a  $10,000  valuation.  I  can  see  where  the  assessor  goes  around 
and  takes  the  physical  condition  to  determine  whether  that  is  a  good 
value  or  not. 

Senator  Ferguson.  Isn't  that  what  you  get  your  income  on  ? 

Mr.  Goheen.  Yes ;  but  part  of  that  value  is  on  the  land  and  part  on 
the  improvements.  In  our  case,  more  was  in  land  than  in  improve- 
ments, yet  we  were  producing  our  normal  income  off  the  improve- 
ments. 

Senator  Ferguson.  But  under  the  law  land  has  to  be  assessed  on  the 
actual  cash  value. 

Mr.  Goheen.  That  is  correct;  that  is  what  the  law  says.  If  there 
were  no  sales  negotiated  in  the  particular  area  then  nobody  knows 
what  the  cash  value  is. 

(Off  the  record.) 

The  Acting  Chairman.  Back  on  the  record. 

Mr.  Goheen.  I  would  like  to  ask  a  little  further 

The  Acting  Chaerman.  Off  the  record. 

(Off  the  record.) 

Mr.  Goheen.  I  would  like  to  raise  the  question  of  the  condition 
report  which  the  Army  made  to  their  various  and  sundry  commands. 
They  took  our  hotel  on  July  24.  The  first  condition  report  was  made 
on  July  23,  which  was  the  gardener.     The  next  report  was  made  by 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM     8719 

the  property  man.  He  made  a  condition  report,  finding  all  the  defects, 
among  them  being  that  porches  on  the  outside  were  all  chipped.  Well, 
it  so  happened  the  house  was  being  painted  and  I  had  to  ask  at  that 
time  permission  of  Major  Fitch  to  finish  the  painting  job,  which  he 
granted  me,  and  which  I  have  his  O.  K.  on  right  here.  I  bring  that 
out  to  show  that  no  matter  how  well  kept  you  had  your  property  there 
was  always  a  yardstick  used  to  beat  down ;  that  the  property  wasn't 
up  to  standard.  The  last  report  was  made  on  October  7,  which  was 
made  by  the  electrician. 

Now,  what  I  am  trying  to  set  forth  here  is  that  they  had  taken  pos- 
session on  the  24th  of  July.  They  had  taken  up  until  October  7  to 
find  out  what  the  condition  of  the  house  was  after  they  had  put  their 
soldiers  in  there,  and  I  state  that  that  condition  report  is  not  correct. 
I  further  state  that  we  were  told  when  this  condition  report  came  back 
that  we  had  to  sign  it  or  we  couldn't  get  any  rent. 

The  Acting  Chairman.  Who  told  you  that  ? 

Mr.  Goheen.  Someone  in  the  post  engineers'  office. 

The  Acting  Chairman.  Who  told  you  that  ? 

Mr.  Goheen.  I  can't  tell  you  the  name. 

The  Acting  Chairman.  A  commissioned  officer? 

Mr.  Upham.  A  civilian  employee,  and  in  one  case  the  rent  was  not 
paid.     That  was  Mr.  Haynes,  who  testified  before  us. 

The  Acting  Chairman.  You  mean  the  gentleman  from  Daytona 
Beach? 

Mr.  Upham.  In  another  case  in  St.  Petersburg  they  did  not  sign 
the  condition  report,  but  they  have  gotten  the  rent. 

The  Acting  Chairman.  It  is  a  basis  for  cancelation  ? 

Mr.  Upham.  A  basis  for  settlement. 

Mr.  Goheen.  I  am  bringing  out  the  point  that  they  weren't  fair 
first  in  their  condition  report,  which  leads  up  to  the  fact  that  they 
weren't  fair  in  their  settlement  report,  and  in  making  the  appraisal 
for  settlement,  I  might  state  that  I  think  that  I  perhaps  was  the  first 
one  and  the  only  one  who  matched  the  Government's  engineers  in  their 
survey.  They  had  nine  men  at  my  hotel  at  9  o'clock  one  morning,  as 
agreed  on,  and  I  had  nine  there.  In  other  words,  I  matched  every 
man  they  had. 

Senator  Ferguson.  Did  it  do  you  any  good  ? 

Mr.  Goheen.  It  hasn't  done  me  any  good  so  far. 

The  Acting  Chairman.  In  other  words,  your  estimate  of  the  situa- 
tion was  strategically  correct? 

Mr.  Goheen.  And  theirs  was  not. 

The  Acting  Chairman.  Evidently  the  number  of  men  was  not  a 
military  secret. 

Mr.  Goheen.  No,  sir,  and  Major  Fitch  was  on  the  job  a  very  few 
minutes  himself.    He  had  mostly  civilians. 

Senator  Ferguson.  Apparently  he  was  a  quite  active  major. 

Mr.  Goheen.  He  was ;  he  was  everywhere  and  I  personally  went  in 
every  room  and  I  made  demands  of  what  we  expected  to  be  done  in 
that  room.  We  gave  a  reconditioned  report,  which  perhaps  they  have 
in  their  records.  I  don't  have  it.  On  that  request  I  then  furnished 
my  estimate.  I  happened  to  have  building  experience  for  the  last  21 
years  myself,  and  I  had  run  my  own  maintenance  crews,  so  I  had  some 


8720     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

knowledge,  but  with  that  I  had  each  one  of  these  men  that  I  had  with 
me  make  up  their  own  estimate  and  I  have  most  of  them  in  writing,  in 
bids.1 

Senator  Ferguson.  That  is  all  furnished  to  the  committee  ? 

Mr.  Goheen.  Yes,  sir. 

The  Acting  Chairman.  At  the  time  they  took  over  did  you  have 
any  detailed  condition  report  of  your  own  as  of  the  time  of  taking 
over?     Did  you  prepare  anything  of  that  kind  yourself? 

Mr.  Goheen.  No,  sir;  the  only  thing  I  did  was  to  try  to  get  the 
hotel  in  such  order  as  they  wanted;  take  out  such  furniture  as  they 
wanted  out  and  leave  that  they  wanted  and  at  that  time  Major  Fitch 
and  another  officer  went  through  the  hotel  and  said  we  had  left  it 
just  like  they  wanted  it.  We  had  eliminated  the  double  beds.  We  tore 
them  down,  and  we  haven't  set  up  a  claim  for  that.  That  amounted 
to  $300  or  so.  That  was  in  preparation  to  turn  it  over  to  them  on 
July  24. 

Mr.  Upham.  With  respect  to  these  rents,  you  asked  the  question, 
Senator,  as  to  when  we  made  up  our  minds  we  weren't  happy  about 
these  rents.  According  to  the  best  guess  that  we  could  make,  Fitch 
was  willing  to  pay  11  percent  and  the  county  valuation,  theoretically, 
was  100  percent.  In  the  case  of  the  Southmore  Apartments  the  Army 
paid  $2,700  rent  and  that  property  was  sold  in  1941  for  $60,000.  That 
is  less  than  5  percent.  In  the  case  of  the  Pennsylvania,  that  property 
cost  $500,000  and  the  rent  was  $25,000. 

(The  documents  referred  to  were  marked  "Exhibits  Nos.  939  and 
940"  and  are  included  in  the  appendix  on  pp.  8993  and  8994.) 

The  Acting  Chairman.  That  was  in  1926.     That  was  a  boom  time. 

Mr.  Upham.  I  was  formerly  one  of  the  directors  of  that  hotel  com- 
pany. Three  hundred  thousand  dollars  was  the  bond  issue  on  it.  That 
was  the  mortgage  on  it.  The  Royal  Palm  Hotel  we  carry  at  $184,000. 
We  got  $12,500.  Vinoy  Park,  $4,612  000,  and  the  rent  was  $92,250. 
The  Mount  Vernon  cost  $175,000  and  the  rent  was  $12,000.  The  Mount 
Vernon  is  5  years  old.  The  Stanton  cost  $95,000,  was  only  operated 
for  6  months,  and  then  turned  over  to  the  Army  at  the  rate  of  $5,500. 

Now,  if  the  Government  were  being  fair  in  offering  11  percent, 
or  following  the  11  percent  rule  on  our  county  assessor's  valuation, 
these  rents  are  half  as  much  as  they  should  have  been  on  the  actual 
valuations,  actual  costs.  Perhaps  we  should  elect  a  new  county 
assessor. 

Senator  Ferguson.  The  rate  did  figure  11  percent  on  the  county 
assessment. 

Mr.  Upham.  On  a  narrow  range ;  yes,  sir. 

Mr.  Goheen.  In  our  case  it  came  up  to  10%  percent  or  10%  percent. 
Originally  it  started  out  at  10-minus,  and  wound  up  at  10-plus. 

Mr.  Upham.  I  would  like  to  ask  the  committee  to  consider  the 
hotel  situation  in  St.  Petersburg  and  in  Miami  although  I  don't  at- 
tempt to  speak  for  the  Miami  group  at  all.  In  Time  magazine  for 
September  20 1  want  to  call  your  attention  to  the  account  of  the  recon- 
version of  the  Kelly-Springfield  plant  in  Cumberland,  Md.  The  plant 
has  been  employing  5,500  men  and  the  statement  is  made  in  this 
article  that  "the  company  has  dodged  the  horrific  bugaboo  now  raising 


1  See  Exhibit  No.  931,  appendix,  pp.  8964-S985. 


INVESTIGATION    OF    THE    NATIONAL    DEFENSE    PROGRAM     8721 

the  hackles  of  reconversion  cost.  The  Government  will  foot  the  bill, 
a  standard  practice  when  it  leases  a  plant." 

Now,  it  is  a  little  hard  for  us  to  understand,  particularly  in  the  face 
of  these  settlements,  that  we  should  be  treated  any  differently  from 
the  stockholders  at  Kelly-Springfield  or  any  other  industrial  plant  in 
the  United  States.  Most  of  the  people  who  own  hotels  in  St.  Peters- 
burg have  their  life  savings  in  them.  Some  of  them  are  not  as  young 
as  I  am  by  a  good  deal.  They  are  much  older  and  they  can't  stand 
to  have  this  thing  come  on  them  in  the  face  of  poor  business,  such  as 
we  are  facing.  I  would  like  to  ask  this:  Senator  Ball  is  planning 
on  coming  to  St.  Petersburg  in  another  2  weeks.  I  would  like  to 
ask  your  committee  to  perhaps  have  Senator  Ball  take  part  of  his 
vacation — I  don't  think  you  gentlemen  are  going  to  get  too  much 
while  you  are  here  in  Florida- — and  go  into  some  of  these  problems 
over  here,  if  you  think  it  worth  while. 

Senator  Ferguson.  What  do  you  mean  "problems"?  Looking  at 
buildings  ? 

Mr.  Upham.  Discussing  these  figures  with  these  people  and  de- 
termining whether  we  really  have  a  legitimate  complaint.  There 
wouldn't  be  time  for  them  to  come  over  and  you  don't  want  to  take  time 
to  listen  to  them. 

(The  documents  referred  to  were  marked  "Exhibits  Nos.  941  to 
957,"  and  are  included  in  the  appendix  on  pp.  8996-9015.) 

The  Acting  Chairman.  Is  that  all,  gentlemen  ? 

Mr.  Upham.  I  think  that  is  all. 

Mr.  Goheen.  Have  you  any  further  questions  ? 

The  Acting  Chairman.  I  have  nothing  further.  Mr.  Dunn,  please. 
J  believe  your  name  is  George  M.  Dunn  and  you  are  president  and 
manager  of  Town  Talk  Bakery  ? 

Mr.  Dunn.  That  is  right, 

The  Acting  Chairman.  Do  you  solemnly  swear  that  the  evidence 
you  shall  give  in  the  matter  now  in  hearing  shall  be  the  truth,  the 
whole  truth,  and  nothing  but  the  truth,  so  help  you  God  ? 

TESTIMONY  OF  GEORGE  M.  DUNN,  PRESIDENT-MANAGER,  TOWN 
TALK  BAKERY,  ST.  PETERSBURG,  FLA. 

TOWN   TALK  BAKERY,   ST.    PETERSBURG ACQUISITION   BY   ARMY 

The  Acting  Chairman.  I  believe  that  bakery  is  or  was  under  lease  to 
the  United  States  Army.  If  you  have  any  statement  to  make  about 
that,  go  ahead. 

Mr.  Dunn.  I  have  a  statement  here  in  letter  form — a  sworn  state- 
ment— and  I  think  I  can  cover  this  better  reading  this  and  then  I  will 
be  glad  to  answer  questions. 

Senator  Ferguson.  Could  you  give  us  the  substance  of  it  and  file 
the  letter? 

The  Acting  Chairman.  Yes ;  that  will  save  time. 

(The  letter  referred  to  was  marked  "Exhibit  No.  958"  and  is  in- 
cluded in  the  appendix  on  p.  9015.) 

Mr.  Dunn.  At  the  outset  I  might  say  that  my  wife  and  myself  are 
the  sole  owners  of  the  Town  Talk  Bakery  of  St.  Petersburg,  Fla. 


8722     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

Senator  Ferguson.  What  is  the  substance  of  your  complaint  ?  The 
amount  they  paid  you  for  it  ? 

Mr.  Dunn.  Regarding  the  manner  and  method  of  lease  and  the 
manner  and  method  of  turning  it  back.  That  constitutes  the  reason  I 
am  here. 

Upon  Mr.  Halley's  suggestion,  I  have  included  in  this  letter,  which 
is  in  the  form  of  an  affidavit,  the  profits  of  our  property  or  business 
over  a  5-year  period,  which  average  $9,770.40  per  year,  or  per  12 
months'  earnings.  I  might  state  that  the  Army  was  not  solicited  by 
anyone  directly  regarding  this  property.  Major  Deigner  of  the  Army 
Air  Training  Force  informed  me,  after  making  a  survey  of  our  prop- 
erty that  he  had  visited  the  other  properties  at  St.  Petersburg  and  that 
we  had  the  one  bakery  property  that  they  wanted.  He  claimed  they 
needed  a  bakery  property  for  the  purpose  of  establishing  a  bakers' 
school,  and  he  told  me  he  hated  to  take  the  Town  Talk  Bakery  right  out 
of  circulation,  so  far  as  the  people  of  St.  Petersburg  were  concerned, 
but  they  needed  the  property  and  he  wanted  me  to  enter  into  negotia- 
tions with  the  Engineer  Department. 

The  Acting  Chairman.  That  was  a  commercial  bakery  and  they 
wanted  to  use  it  as  a  cooks  and  baker's  school  ? 

Mr.  Dunn.  It  was  a  commercial  wholesale  bakery. 

The  Acting  Chairman.  They  were  leasing  it  to  use  as  a  school? 

Mr.  Dunn.  That's  right. 

The  Acting  Chairman.  Did  it  have  a  similar  type  of  equipment  to 
what  is  used  in  army  bakeries  ? 

Mr.  Dunn.  I  don't  know  what  type  of  facility  is  used  in  Army 
.bakeries. 

The  Acting  Chairman.  Did  they  use  your  equipment  in  there  ? 

Mr.  Dunn.  Yes. 

The  Acting  Chairman.  They  used  that  for  teaching  purposes  ? 

Mr.  Dunn.  That  is  what  I  was  told  by  Major  Deigner,  and  one  of 
the  things  that  influenced  us  to  enter  the  negotiations  immediately. 
It  was  on  the  basis  of  the  fact  that  they  needed  this  property  for  a 
bakery  school,  but  to  this  date  the  property  has  never  been  used  as  a 
bakery  school. 

Senator  Ferguson.  When  did  you  lease  it? 

Mr.  Dunn.  As  of  July  15,  1942. 

Senator  Ferguson.  When  did  they  turn  it  back? 

Mr.  Dunn.  As  of  August  30,  1943. 

Senator  Ferguson.  In  other  words,  they  held  it  13  months  and 
never  used  it  ? 

Mr.  Dunn.  They  used  it  all  of  that  time — those  13  months— but  not 
as  a  bakers'  school. 

Senator  Ferguson.  What  did  they  use  it  for  ? 

Mr.  Dunn.  They  put  in  a  crew  of  bakers  and  made  pie,  cookies,  and 
some  dark  breads  for  the  messes  at  the  various  hotels  in  St.  Petersburg. 

Senator  Ferguson.  What  difference  did  that  make  to  you  whether 
they  used  it  as  a  school  or  to  supply  their  own  people  ? 

Mr.  Dunn.  This  fact:  that  there  were  bakeries,  including  our  own 
in  St.  Petersburg,  who  could  have  supplied  them  with  all  the  require- 
ments they  needed. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE   PROGRAM     8723 

Senator  Ferguson.  You  mean  the  fact  that  the  Government  took  it 
over  and  operated  it  rather  than  having  private  industry  operate  it? 
That  wouldn't  affect  you  any  more  than  any  other  citizen. 

Mr.  Dunn.  No,  only  that  it  did  influence  us  in  our  decision  in  leasing 
the  property.  They  claimed  they  needed  the  property  for  that  par- 
ticular purpose  and  it  was  with  that  understanding  that  we  entered 
into  negotiations  with  them.  Of  course,  it  didn't  influence  the  leasing 
or  anything,  other  than  the  fact  that  they  said  they  needed  it  for  that 
purpose  and  then  they  didn't  use  it  for  that  purpose. 

Senator  Ferguson.  And  how  did  you  arrive  at  the  rental  ? 

Mr.  Dunn.  They  told  us.  Well,  first  of  all,  I  entered  into  negotia- 
tions with  Mr.  Spooner,  who  was  the  civilian  representing  the  then 
Major  Fitch,  and  Mr.  Spooner,  I  asked  him  what  they  would  consider. 
Who  was  to  take  care  of  the  outside  and  the  inside  upkeep,  and  whether 
the  insurance  and  the  taxes  would  be  paid  by  the  Government  or  by  us, 
and  such  things  as  that,  and  whether  or  not  they  would  consider  any- 
thing, because  of  the  fact  that  it  was  a  going  business,  and  that  we 
had  to  abandon  our  established  business,  and  had  to  abandon  our  estab- 
lished organization,  if  they  took  the  business  over,  and  he  told  me  that 
the  business  would  be  leased  only  on  the  basis  of  property  values ;  that 
none  of  these  other  things  could  be  taken  into  consideration.  So  we 
then  arrived  at  a  figure  that  would  cover  our  carrying  charges,  and 
asked  for  $6,500  a  year,  and  it  was  to  be  understood  it  was  on  a  yearly 
basis.  They  wanted  a  yearly  figure.  So  Major  Fitch,  as  I  understood 
it,  was  in  Miami  here  at  the  time,  and  Mr.  Spooner  got  in  touch  with 
Major  Fitch,  called  me  in  a  couple  of  days  and  told  me  that  the  Army 
figure  was  between  $4,000  and  $5,000.  When  he  called  me  at  the  office 
he  took  a  scratch  pad  and  wrote  down  and  said :  "There's  what  Major 
Fitch  says  it  will  be,"  and  it  was  somewhere  between  $4,000  and  $5,000, 
and  I  told  him  it  was  not  satisfactory ;  that  our  carrying  charges  were 
more  than  that.  The  last  full  year  we  operated,  our  depreciation  and 
taxes  and  insurance  ran  between  $5,700  nd  $5,800,  and  I  told  him  that 
we  should  at  least  get  as  much  as  our  carrying  charges,  so  I  told  him 
that  I  was  not  going  to  be  branded  as  unpatriotic  by  turning  it  down, 
and  I  wasn't  going  to  accept  it  at  that  figure,  and  I  made  the  offer  of 
employing  someone  from  the  American  Appraisal  Co.,  or  some  other 
appraisal,  and  I  would  pay  for  them  to  make  an  appraisal  of  the 
property,  and  we  would  stand  on  whatever  their  decision  was.  If  they 
found  our  figures  for  valuation  too  high,  that  would  be  the  decision. 

Senator  Ferguson.  What  percentage  was  it  to  be  on  the  valuation  ? 

Mr.  Dunn.  I  don't  know.  They  didn't  tell  me  that.  I  told  him  that 
if  the  appraiser's  figure  were  higher,  all  right ;  if  they  were  lower,  all 
right ;  but  I  feel  we  were  very  conservative  in  arriving  at  a  lease  figure, 
and  they  said  they  wouldn't  permit  me  to  do  that,  but  in  a  few  days  they 
did  employ  a  local  appraiser,  Mr.  John  Donohoe,  and  he  came  to  the 
bakery  and  made  an  appraisal  of  the  property.  A  few  days  later  they 
came  to  the  office  and  made  me  an  offer  of  $6,200,  which  was  slightly 
above  our  carrying  charges,  and  under  the  circumstances  we  accepted  it. 

Senator  Ferguson.  What  is  the  complaint  in  that  ? 

Mr.  Dunn.  The  only  complaint  is  that  we  don't  feel  we  got  anything 
for  the  operation  of  the  bakery. 


8724     INVESTIGATION    OF   THE    NATIONAL   DEFENSE    PROGRAM 

Senator  Feeguson.  But  you  did  this  voluntarily ;  didn't  you  ? 

Mr.  Dunn.  Yes;  we  did  this  voluntarily,  but,  as  one  of  the  other 
witnesses  said,  it  was  under  duress. 

Senator  Feeguson.  How  was  that  under  duress  ? 

Mr.  Dunn.  We  realized  that  if  we  refused,  if  the  hotels  in  St.  Peters- 
burg voluntarily  leased  their  property  to  the  Government  and  we  held 
out 

Senator  Ferguson.  You  were  afraid  of  public  opinion  ? 

Mr.  Dunn.  That's  it,  exactly ;  and  we  knew  public  opinion  would  be 
very  unfavorable  if  it  appeared  that  the  Town  Talk  Bakery  was 
standing  in  the  way  of  the  war  effort. 

Senator  Feeguson.  But  you  can't  now  complain  about  the  Army, 
can  you,  because  you  were  influenced  by  public  opinion  ?  You  felt  that 
if  you  did  not  do  that  the  hotels  might  not  get  their  customers  and  the 
town  would  be  affected,  and  the  chamber  of  commerce  and  other  groups 
might  be  against  you. 

Mr.  Dunn.  That's  the  reason  we  signed  up  for  that  figure.  It  was 
considerably  less  than  what  the  property  had  been  earning,  and  it 
meant  destroying,  or  abandoning,  our  advertised  brand  of  product. 

Senator  Ferguson.  When  they  turned  it  back — they  kept  it  a  year — 
did  they  notify  you  a  month  ahead  that  they  would  give  it  back  to 
you? 

Mr.  Dunn.  Yes,  sir. 

Senator  Ferguson.  So  you  knew  in  a  year ;  there  was  no  complaint 
on  that  ? 

Mr.  Dunn.  That's  right. 

Senator  Ferguson.  The  full  year  was  up  ? 

Mr.  Dunn.  Yes. 

The  Acting  Chairman.  How  long  had  you  been  operating  under 
the  trade  name  of  Town  Talk  Bakery  ? 

Mr.  Dunn.  Seven,  going  on  8  years. 

The  Acting  Chairman.  Don't  you  think  the  biggest  damage  was 
taking  your  product  off  the  market  for  12  months  ? 

Mr.  Dunn.  Yes ;  the  biggest  damage  was  abandoning  our  organiza- 
tion and  abandoning  that  at  a  time  when  all  bakers  are  working.  It  is 
an  essential  industry,  and  all  bakers  are  subject  to  the  War  Manpower 
Commission  and  frozen  on  their  jobs.  The  property  was  given  back 
the  last  of  August,  and  we  haven't  been  able  to  get  an  organization 
together. 

The  Acting  Chairman.  Your  building  is  on  your  hands  and  you 
can't  use  it  now  ? 

Mr.  Dunn.  That's  it  exactly. 

Senator  Ferguson.  Are  you  using  it  at  all  ? 

Mr.  Dunn.  Not  at  all.  I  have  a  complete  modern  bakery,  and  I  can't 
get  an  organization  together.  We  had  26  trained  employees  when  we 
closed  up,  and  they  all  went  to  work  at  other  bakeries.  I  tried  through 
Standard  Brands,  Pillsbury's,  and  a  number  of  other  organizations  to 
locate  the  nucleus  of  an  organization,  and  they  are  not  to  be  had. 

Senator  Ferguson.  Was  it  returned  to  you  in  as  good  condition  as 
when  you  turned  it  over  ? 

Mr.  Dunn.  No,  sir;  it  was  not. 

Senator  Ferguson.  Did  you  have  an  adjustment  on  that? 

Mr.  Dunn.  In  this  way :  One  of  the  post  engineers  and  a  civilian 
estimator  and  a  contractor  whom  I  employed,  and  myself,  the  four  of 


INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM     8725 

us  went  through  and  made  an  estimate  of  the  damages  to  the  building. 
The  way  they  went  about  it — that  was  just  the  building.  The  way 
they  went  about  it  was  different  from  the  way  that  they  arrived  at  their 
damages  in  the  hotels.  Each  of  these  two  estimators  would  come  to  a 
certain  thing — a  window  that  is  broken,  for  example.  Say  it's  6  by  8 
and  it's  worth  $8,  and  they  would  arrive  at  that  and  both  would  put  it 
down,  and  when  they  finished,  their  total  was  $725  and  some  odd  cents. 
Major  Fitch  offered  me  $800  in  settlement  in  full  if  I  would  sign  a 
release  and  I  told  him  that  their  estimator  arrived  at  $725  for  the 
building  alone  and  $75  wouldn't  touch  putting  the  machinery  and 
equipment  back  into  condition,  and  I  told  him,  I  said,  "If  you  want  to, 
you  go  ahead  and  do  the  restoration  yourself."  They  sent  a  crew  out 
there  and  worked  for  several  days  and  then  they  called  me  in  and  asked 
me  to  come  down  and  get  the  keys  and  take  possession  of  the  property, 
so  I  went  down  to  see  them  and  told  them  that  before  accepting  the 
keys  I  wanted  to  go  out  and  check  over  and  see  what  restoration  had 
been  done.  We  went  through  the  plant  and  they  hadn't  done  over  a 
third  of  the  things  that  were  necessary  to  put  them  back  in  condition ; 
so  I  refused  to  accept  it. 

That  happened  once  or  twice  after  that.  They  would  say,  "All  right, 
when  you  are  ready  to  sign  off,  come  down  and  get  the  keys."  We'd 
look  at  the  bakery  and  they  would  not  have  finished  the  restoration,  so 
finally  Captain  Brown  of  the  Post  Engineers  told  me  that  he  was 
signing  off  as  of  September  3 ;  that  they  were  going  to  make  no  further 
repairs  or  no  further  restoration,  and  that  he  was  sending  me  the  keys 
by  registered  mail,  and  the  notice  that  they  were  signing  off  as  of  that 
date. 

Senator  Ferguson.  Did  they  pay  your  rent  up  to  that  time  ? 

Mr.  Dunn.  They  haven't  yet ;  they  agreed  to  pay  the  rent  up  to  Sep- 
tember 3.  I  went  through  the  bakery ;  there  were  some  9  or  10  items 
they  hadn't  touched — things  just  as  essential  for  restoration  as  the 
things  they  had  done. 

Senator  Ferguson.  What  would  that  cost  be? 

Mr.  Dunn.  Approximately  $100.  We  quibbled  about  that  back  and 
forth  until  after  Major  Fitch  left  St.  Petersburg.  We  have  not  signed 
a  release. 

Senator  Ferguson.  Have  vou  put  that  machinery  back  into  condi- 
tion ? 

Mr.  Dunn.  They  did  some  of  the  painting  and  some  of  the  restoring 
and  since  that  time  I  have  done  some  of  the  restoring. 

Senator  Ferguson.  At  a  cost  of  how  much  ? 

Mr.  Dunn.  I  haven't  even  made  an  estimate  as  to  cost  because  I  am 
not  figuring  on  making  any  claim  for  the  additional. 

Senator  Ferguson.  So  you  are  really  $100  apart  on  that  item  ? 

Mr.  Dunn.  That's  all;  yes.  The  only  thing  is  that  the  damage 
they  did  to  the  concrete  floor  has  been  such  that  it  is  going  to  take  some 
six  or  seven  hundred  dollars  to  repair  it. 

Senator  Ferguson.  How  would  they  damage  a  concrete  floor  ? 

Mr.  Dunn.  By  scrubbing  it  with  scalding  water  and  strong  soap 
that  they  use  and  they  washed  the  concrete  away  from  the  pebbles 
so  the  pebbles  stand  up  like  this  [indicating]  in  quite  a  number  of 
places  on  the  floor.  They  had  this  repaired  when  we  went  to  take 
possession  of  the  property.  They  had  this  place  repaired ;  it  is  about 
one-third  of  the  entire  surface  of  the  back  shop — with  a  black  compo- 


8726     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

sition  of  some  kind,  and  if  you  run  over  it  with  a  machine  with  steel 
casters  on  it,  and  if  you  let  it  sit  on  it,  the  casters  sink  in. 

Senator  Ferguson.  So  that  is  another  claim  of  $700  you  have  for 
that? 

Mr.  Dunn.  I  am  willing  to  check  that  off.  I  am  not  making  that 
claim.  They  finally  said,  "We  will  tear  that  floor  off  if  that  will  ba 
satisfactory."  I  said,  "It  won't  be  satisfactory,  but  all  we  want  is  a 
floor  that  we  can  use  and  that  was  something  that  we  had  in  here  when 
we  turned  the  bakery  over." 

Senator  Ferguson.  Have  you  ever  taken  up  with  the  War  Man- 
power Commission  the  matter  of  supplying  you  with  men? 

Mr.  Dunn.  No  ;  I  haven't. 

Senator  Ferguson.  They  have  the  power,  haven't  they  ? 

Mr.  Dunn.  I  don't  know. 

Senator  Ferguson.  You  say  they  are  all  frozen  and  the  War  Man- 
power authorities  could  release  them  to  you  under  the  situation.  Are 
there  enough  bakeries  in  St.  Petersburg  ? 

Mr.  Dunn.  There  is  a  scarcity.  Just  prior  to  our  leasing  our  prop- 
erty to  the  Army  there  was  a  wholesale  bakery  that  went  out  of  bus- 
iness. 

Senator  Ferguson.  So  for  the  war  effort,  in  feeding  the  people,  your 
bakery  should  be  necessary  ? 

Mr.  Dunn.  It  should  be ;  very  much  so. 

The  Acting  Chairman.  Is  there  anything  further? 

Mr.  Dunn.  There  is  one  thing  that  will  take  about  2  minutes.  Mr. 
Herbert  Grant,  who  represents  the  Harry  Playf  ord  interests,  owners  of 
the  Empire  Building,  which  is  a  six-story  office  building  in  St.  Peters- 
burg, was  unable  to  come  here  today  and  asked  me  to  put  this  affidavit 
and  statement  in  the  record.  It  has  to  do  with  the  leasing  and  re- 
leasing of  the  Empire  Office  Building. 

The  Acting  Chairman.  You  may  file  that,  then. 

(The  affidavit  referred  to  was  marked  "Exhibit  No.  959"  and  is  in- 
cluded in  the  appendix  on  p.  9019.) 

Senator  Ferguson.  Has  the  building  been  released  ? 

Mr.  Dunn.  It  has  beeen  released ;  yes,  sir. 

Senator  Ferguson.  What  date  was  that? 

Mr.  Dunn.  This  says,  "turned  back  to  us  on  July  31, 1943." 

Senator  Ferguson.  Do  you  have  any  questions,  Senator  Pepper? 

Senator  Pepper.  Not  at  all ;  thank  you. 

The  Acting  Chairman.  Thank  you  very  much,  Mr.  Dunn. 

Mr.  Meyer  Cohen.  Do  you  solemnly  swear  the  evidence  you  are 
about  to  give  in  the  matter  now  in  hearing  shall  be  the  truth,  the 
whole  truth,  and  nothing  but  the  truth,  so  help  you  God  ? 

Mr.  Cohen.  Yes,  sir. 

TESTIMONY  OF  MEYER  COHEN 

TIDES   HOTEL,   MIAMI   BEACH — ACQUISITION   BY   ARMY 

Senator  Pepper.  Mr.  Cohen,  you  told  me  you  had  an  embarrassing 
situation  confronting  you  where  you  had  an  obligation  maturing 
February  1, 1  believe,  or  some  other  date,  against  your  hotel  which  is 
now  being  held  by  the  armed  forces,  and  your  rentals  are  not  going 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8727 

to  be  enough  to  meet  that  obligation  and  you  are  fearful  of  losing  it. 
You  go  ahead  and  tell  your  story  to  the  committee. 

Mr.  Cohen.  The  Tides  Hotel,  located  at  1220  Ocean  Drive,  is  a 
114-room  hotel.  The  Government  is  paying  me  $34,600  rental  a  year. 
Previous  to  that  I  leased  the  hotel  for  $45,600.  I  happened  to  buy 
the  hotel  about  6  weeks  before  the  Government  took  it. 

(The  document  referred  to  was  marked  "Exhibit  No.  960"  and  is 
included  in  the  appendix  on  p.  9020.) 

Senator  Ferguson.  You  have  an  underlying  mortgage  on  it  now? 

Mr.  Cohen.  Yes,  sir. 

Senator  Ferguson.  What  size? 

Mr.  Cohen.  I  have  four  mortgages,  I  guess.     The  first  one  is  $90, 

000  and  the  second  is  $30,000  and  the  third  one  is  $40,600. 
Senator  Ferguson.  What  is  the  fourth  one  ? 

Mr.  Cohen.  It  is  just  three,  I  guess. 

Senator  Ferguson.  You  knew  what  the  mortgages  were  when  you 
leased  it? 

Mr.  Cohen.  Yes,  sir. 

Senator  Ferguson.  And  you  knew  what  the  payments  were? 

Mr.  Cohen.  Yes,  sir. 

Senator  Ferguson.  What  is  your  complaint  against  the  Govern- 
ment? 

Mr.  Cohen.  My  complaint  is  more  for  protection,  I  guess.  At  the 
time  I  leased  it  I  showed  the  committee  my  figures.  I  definitely 
couldn't  come  out  at  $34,600. 

Senator  Ferguson.  What  is  the  committee  to  whom  you  showed  it  ? 

Mr.  Cohen.  The  citizens'  committee. 

The  Acting  Chairman.  Who  composed  the  committee? 

Mr.  Cohen.  I  don't  know  a  thing  about  that. 

Senator  Ferguson.  What  are  their  names? 

Mr.  Cohen.  Local  real-estate  men ;  and  at  the  time  I  showed  them 
my  obligations  and  everything  else,  and  I  told  them  I  couldn't  come 
out  on  those  figures,  so  one  of  the  committee  made  a  remark,  "Well, 
it's  not  our  fault  you  paid  too  much  money  for  the  hotel,"  or  some- 
thing to  that  effect.     Last  year  I  had  an  obligation  due  of  $10,000  and 

1  had  another  business  that  I  took  the  money  from  to  meet  the  obliga- 
tion, because  naturally  the  $34,000  the  Government  paid  me  didn't 
warrant  to  pay  it  off.  It  wasn't  enough.  This  year  I  have  another 
$10,000  coming  due. 

Senator  Ferguson.  On  what  mortgage? 

Mr.  Cohen.  On  the  third  mortgage. 

Senator  Ferguson.  How  much  are  your  taxes? 

Mr.  Cohen.  About  $5,200. 

Senator  Ferguson.  What  other  expenses  have  you? 

Mr.  Cohen.  All  of  my  expenses  amount  to  almost  exactly  what 
the  Government  pays. 

Senator  Ferguson.  And  the  $10,000  is  in  excess  of  that? 

Mr.  Cohen.  That's  not  including  depreciation. 

The  Acting  Chairman.  It  does  not  include  interest  on  your  mort- 
gages—the $10,000? 

Mr.  Cohen.  No. 

Senator  Ferguson.  What  do  you  think  the  Government  should  do, 
since  you  signed  this  lease? 


8728     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

Mr.  Cohen.  Well,  I  think  the  Government  might  protect  people 
that  have  these  mortgages;  that  the  mortgage  holders  should  wait 
until  something  can  be  paid  later. 

Senator  Ferguson.  You  want  some  kind  of  a  moratorium? 

Mr.  Cohen.  Yes;  plus  I  think  the  $34,600  they  are  paying  is  not 
sufficient  for  the  type  of  building. 

Senator  Ferguson.  Do  you  want  the  building  back? 

Mr.  Cohen.  I  didn't  come  to  ask  for  that.  Getting  the  building 
back  today  wouldn't  help  my  situation. 

Senator  Ferguson.  That  would  be  worse  ? 

Mr.  Cohen.  Yes,  sir. 

The  Acting  Chairman.  I  wish  you  would  tell  us.  You  are  hinting 
around  about  something.  I  want  to  get  the  real  facts  as  to  how  you 
happened  to  lease  the  hotel. 

Mr.  Cohen.  I  signed  a  blanket  option. 

The  Acting  Chairman.  Who  negotiated  that? 

Mr.  Cohen.  The  citizens'  committee,  after  I  signed  a  blanket  option 
for  $45,600. 

The  Acting  Chairman.  You  signed  a  blanket  option  of  $45,600? 

Mr.  Cohen.  That's  what  I  paid  rent  6  weeks  previous  to  buying 
it,  for  $45,600,  and  I  made  an  option  that  I  would  turn  it  over  at 
the  same  rental  that  I  paid. 

The  Acting  Chairman.  Now  then,  they  did  not  accept  that  pro- 
posal in  the  form  of  an  option  which  you  had  granted,  and  instead 
you  were  talked  to  by  the  citizens'  committee  ? 

Mr.  Cohen.  That's  right. 

The  Acting  Chairman.  And  they  told  you  $36,000? 

Mr.  Cohen.  $34,600  was  the  best  they  could  do. 

The  Acting  Chairman.  That  was  the  citizens'  committee? 

Mr.  Cohen.  That's  right. 

The  Acting  Chairman.  That  was  not  Major  Fitch? 

Mr.  Cohen.  I  had  nothing  to  do  with  any  Army  officer. 

The  Acting  Chairman.  Couldn't  you  have  renewed  your  old  lease 
with  your  former  tenant  'at  $45,600  ? 

Mr.  Cohen.  No.  I  bought  the  building  February  1st,  and  in  April 
the  Government  took  the  hotel. 

Mr.  Halley.  I  think  I  can  straighten  it  out.  Prior  to  buying  the 
building  did  you  rent  it  and  you  paid  rent  to  the  previous  owner? 

The  Acting  Chairman.  You  had  been  the  operator  on  a  lease  ? 

Mr.  Cohen.  That's  right. 

The  Acting  Chairman.  And  then  you  bought  the  building  ? 

Mr.  Cohen.  That's  right. 

The  Acting  Chairman.  Couldn't  you  have  operated  it  there  your- 
self? In  other  words,  instead  of  renting  it  to  the  Government,  why 
didn't  you  operate  it  yourself? 

Mr.  Cohen.  Because  at  that  time  the  Government  needed  hotels. 

The  Acting  Chairman.  What  I  cannot  understand  is  that  if  you 
saw  you  could  not  come  out  on  that  deal,  was  there  any  additional 
reason  why  you  signed? 

Mr.  Cohen.  For  the  simple  reason  the  Government  needed  hotels 
at  that  time  and  I  forgot  my  personal  loss. 

Senator  Ferguson.  They  still  need  them. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8729 

Mr.  Cohen.  I  am  not  complaining ;  I  am  not  saying  I  want  it  back. 

Senator  Ferguson.  If  the  Government  advanced  you  $10,000  on 
your  rent  to  take  care  of  the  obligation,  would  that  help  ? 

Mr.  Cohen.  No  ;  because  in  5  months  I  will  owe  somebody  else. 

The  Acting  Chairman    That  is  postponing  the  inevitable. 

Mr.  Cohen.  And  then  February  1,  1945,  the  two  mortgages  come 
due  and  I  am  losing  the  revenue  of  2  years  so  far;  naturally,  I  wouldn't 
be  able  to  meet  the  other  mortgages  when  they  come  due. 

Senator  Pepper.  Mr.  Cohen,  what  you  mean  to  say  in  substance  is 
this :  The  taking  of  your  hotel  at  a  rental  less  than  was  a  fair  rental 
for  it  will  amount,  in  substance,  to  probably  the  loss  of  your  property ; 
is  that  right? 

Mr.  Cohen.  That's  correct,  sir. 

The  Acting  Chairman.  You  are  getting  $34,600  ? 

Mr.  Cohen.  That's  right,  sir. 

Senator  Ferguson.  But  as  I  understand  it,  this  was  clear  at  the 
time. 

Mr.  Cohen.  Yes. 

The  Acting  Chairman.  If  you  had  gotten  $34,600,  that  would  have 
taken  care  of  your  $10,000  payment,  wouldn't  it? 

Mr.  Cohen.  Well,  they  took  it  in  April  1941. 

Senator  Ferguson.  But  in  1945  you  would  be  in  the  same  hot  water? 

Mr.  Cohen.  To  begin  with,  when  they  took  it,  nobody  knew  how 
long  they  would  keep  it.  We  didn't  look  3  years  ahead.  I  mean  I 
didn't  come  here  to  find  fault,  but 

Senator  Ferguson.  Have  you  tried  to  adjust  the  matter  with  your 
mortgage  holder? 

Mr.  Cohen.  I  went  to  the  first  mortgage  people  and  explained  the 
situation  and  asked  them  to  take  a  smaller  amortization,  which  they 
have  refused. 

Senator  Ferguson.  What  about  your  second  mortgage  ? 

Mr.  Cohen.  That's  not  due  until  next  year. 

Senator  Ferguson.  How  about  the  third?  Can't  you  do  business 
with  them  ? 

Mr.  Cohen.  I'm  afraid  not. 

Senator  Pepper.  Have  you  asked  the  Army  if  they  can  renego- 
tiate the  lease  with  you  ? 

Mr.  Cohen.  I  haven't  talked  with  anybody. 

Senator  Pepper.  But  others  have  made  such  an  inquiry  and  have 
been  advised  that  it  was  not  within  the  power  of  the  Army  to  rene- 
gotiate upward ;  that  they  had  the  authority  only  to  renegotiate  down- 
ward. 

Mr.  Cohen.  All  I  ask  is  this :  I  don't  know  if  there  are  any  more 
cases  like  mine  and  whether  something  cannot  be  done  with  them  and 
if  something  can  be  done  with  the  people  who  hold  the  mortgages 
that  they  should  allow  you  time,  so  that  when  the  Government  re- 
turns the  hotels  they  should  allow  time  to  make  up  for  the  loss. 

The  Acting  Chairman.  In  other  words,  you  would  like  to  have  the 
same  arrangement.  Do  you  have  any  further  questions,  Senator 
Pepper  ? 

Senator  Pepper.  Do  you  anticipate  there  will  be  any  damage  in  your 
case,  Mr.  Cohen,  for  the  hotel? 

311932— 44— pt.  21 15 


8730     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

Mr.  Cohen.  Quite  considerable  damage,  I  imagine,  because  they 
rearranged  everything.  I  understand  they  are  feeding  over  1,800  men 
a  day  in  our  dining  rooms,  and  have  reorganized  everything,  accord- 
ing to  what  they  need.  They  rearranged  everything  in  our  dining 
rooms  and  kitchens  and  everything;  put  in  heavy  equipment  and 
broken  up  floors,  and  put  in  sewers  in  the  lobbies  and  everything. 
There  was  considerable  reorganization  adapted  to  the  Army  needs. 

Senator  Pepper.  There  might  be  a  power  in  the  Army  authorities 
who  have  this  hotel  under  lease  to  anticipate  the  Army  payment  for 
damages  so  they  might  give  him  an  advance. 

The  Acting  Chairman.  Have  you  talked  to  them  about  that  ? 

Mr.  Cohen.  No,  sir. 

The  Acting  Chairman.  My  suggestion  is  that  you  talk  to  them 
promptly  about  that.     We  suggest  that  you  talk  to  Colonel  Knowles. 

Mr.  Cohen.  Where  will  he  be  located  ? 

The  Acting  Chairman.  He  is  right  here. 

We  will  recess  now  until  Friday  at  10  o'clock,  when  we  will  meet  in 
the  City  Hall. 

Senator  Pepper.  Mr.  Chairman,  and  members  of  the  committee,  it 
will  not  be  possible  for  me  to  be  here  when  the  committee  reconvenes 
on  Friday.  Before  leaving,  however,  I  do  wish  on  behalf  of  the  peo- 
ple of  Miami  Beach,  Miami,  and  Florida  to  express  most  cordial 
thanks  to  the  committee  for  coming  here  and  so  attentively  hearing 
what  the  people  had  to  say  about  the  leasing  by  the  Army  of  the 
hotels  and  apartment  houses  in  this  area. 

The  Acting  Chairman.  Thank  you,  Senator  Pepper. 

(Whereupon,  at  2 :  35  p.  m.,  the  committee  recessed  until  10  a.  m., 
Friday,  January  7,  1944.) 


INVESTIGATION  OF  NATIONAL  DEFENSE  PEOGEAM 


FRIDAY,  JANUARY  7,   1944 

United  States  Senate, 
Special  Committee  Investigating 

the  National  Defense  Program, 

Miami  Beach,  Fla. 
The  committee  met  at  10:05  a.  m.,  pursuant  to  adjournment  on 
Wednesday,  January  5, 1944,  in  the  city  hall,  Miami  Beach,  Fla.,  Sen- 
ator Harley  M.  Kilgore  presiding. 

Present :  Senators  Harley  M.  Kilgore  (acting  chairman)  and  Homer 
Ferguson. 

Present  also :  Rudolph  Halley,  executive  assistant  to  chief  counsel ; 
Brig.  Gen.  Frank  E.  Lowe,  executive  officer ;  Lt.  Col.  Miles  H.  Knowles, 
Office  of  the  Under  Secretary  of  War. 

The  Acting  Chairman.  The  committee  will  come  to  order. 
Mr.  Weil,  do  you  solemnly  swear  the  evidence  you  are  about  to  give 
in  the  matter  now  in  hearing  shall  be  the  truth,  the  whole  truth,  and 
nothing  bu  the  truth,  so  help  you  God  ? 
Mr.  Weil.  I  do. 

TESTIMONY  OF  BRUNO  WEIL,  FUTCH  &  WEIL,  REALTORS,  MIAMI 

BEACH,  FLA. 

COMPLAINTS  OF  MIAMI  BEACH  HOTEL  OWNERS  ASSOCIATION 

The  Acting  Chairman.  For  the  benefit  of  the  record,  please  state 
your  name,  occupation,  and  residence  address. 

Mr.  Weil.  My  name  is  Bruno  Weil.  I  reside  at  521  East  Di  Lido 
Island,  Miami  Beach.  I  am  a  hotel  owner,  and  realtor.  I  am  the 
present  chairman  of  a  committee  for  the  Miami  Beach  Hotel  Owners 
Association.  This  committee  has  been  appointed  the  early  part  of 
1943  to  investigate  the  facts  relating  to  many  complaints  which  were 
voiced  on  the  part  of  Miami  Beach  hotel  owners  with  reference  to  their 
dealings  and  negotiations  with  the  Army  leasing  hotels  at  Miami 
Beach. 

Senator  Ferguson.  Will  you  state  now  what  were  the  conclusions  of 
the  complaints  ?     How  many  had  you  ? 

Mr.  Weil.  The  final  conclusion  for  these  complaints  was  as  follows — ■ 
may  I  refer  to  the  records  I  have  ? 

Senator  Ferguson.  Yes. 

Mr.  Weil  (reading)  : 

First,  that  no  uniform  system  was  used  by  the  Army  for  fixing  rentals  and 
no  uniformity  of  rentals  exists  today.  Second,  that  as  a  result  of  newspaper 
articles  and  radio  broadcasts  on  March  23  through  March  25,  1942,  negotiations 

8731 


8732     INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM 

for  hotels  here  were  conducted  in  a  general  atmosphere  of  confusion  and  possibly 
coercion.  Third,  that  we  have  found  that  coercion  was  used  in  specific  indi- 
vidual instances. 

The  Acting  Chairman.  Just  a  minute.  By  whom  was  that  coercion 
used  ? 

Senator  Ferguson.  Radio  commentators  and  editors? 

Mr.  Weil.  No  ;  by  civilian  employees  of  the  Government  negotiating 
these  leases.  , 

Senator  Ferguson.  Mr.  Weil,  you  said  because  of  radio  programs 
and  newspaper  articles.  What  did  you  have  in  mind  when  you  said 
that? 

Mr.  Weil.  I  had  in  mind  the  actual  happening  of  March  23  and 
24.  I  can  perhaps  explain  it  a  little  better  if  I  am  permitted  to 
j)resent  in  evidence  these  newspaper  articles  of  which  I  have  here 
photostatic  copies,  the  first  appearing  on  Monday  morning,  March 
23,  published  by  the  Miami  Herald.  [Handing  document  to  the 
acting  chairman.]  Later  on  that  was  followed  by  other  newspapers 
in  this  area  and  compiled  by  us  in  the  manner  in  which  they  appear 
in  the  rest  of  this  evidence.  [Handing  documents  to  the  acting 
chairman.] 

I  have  not  been  able  to,  or  rather  we  have  not  been  able,  although 
we  have  tried  very  hard,  to  obtain  a  transcript  or  copy  of  the  radio 
broadcast  made  Monday  afternoon,  March  23. 

The  Acting  Chairman.  Who  made  the  broadcast  ? 

Mr.  Weil.  Over  WQAM  by  a  commentator  by  the  name  of  Malone. 

Senator  Ferguson.  Do  you  claim  he  was  an  Army  man  ? 

Mr.  Weil.  I  do  not  claim  he  was  an  Army  man.  He  is  an  employee 
of  the  radio  station,  WQAM,  but  nevertheless,  in  fact,  this  broadcast 
came  over  the  air  and  apparently  was  listened  to  by  the  greater  part 
of  Dade  County,  or  perhaps  as  far  as  this  radio  station  will  reach. 
The  prime  remark  that  Mr.  Malone  made  over  the  radio  was  this: 
That  on  the  basis  of  the  Miami  Herald's  article,  which  I  have  pre- 
sented, Mr.  Malone  claimed  that  the  public  in  this  area  was  pretty 
much  wrought  up  over  this  situation  and  they  insisted  the  names  of 
those  hotel  owners  who  refused  to  cooperate,  who  had  hiked  their 
original  figures,  given  to  the  Army  for  what  they  would  be  willing 
to  lease  the  hotels,  hiked  by  100  or  200  percent,  they  should  like  to 
get  their  names  so  they  can  come  over  to  the  beach  and  take  these 
hotels  down  stone  by  stone. 

The  Acting  Chairman.  Mr.  Weil,  let  me  read  you  from  what  ap- 
parently appears  to  be  the  front  page  of  the  city  edition  of  the  Miami 
Daily  News.  The  heading  is,  "Who  Are  They?"  The  story  is  short. 
I  will  read  it : x 

Without  naming  names,  the  Army  has  charged  "five  or  six"  Miami  Beach 
hotels  with  blocking  the  establishment  of  a  vast  replacement  center,  involving 
upward  of  35,000  men. 

This  is  a  matter  of  tremendous  importance  to  the  people  of  Greater  Miami. 
It  is  not  too  much  to  say  that  their  economic  future  depends  on  it. 

It  is  a  situation  that  every  civic-minded  and  patriotic  American  resents. 

The  entire  community  has  been  placed  in  a  bad  light  by  the  action  of  "five  of 
six"  hotel  men. 

Who  are  they? 

The  public  is  entitled  to  know  their  names. 

The  Army  officials  know  the  names.  They  will  be  doing  a  public  service 
if  they  reveal  them.    Then  the  stigma  will  not  rest  upon  the  200  hotels  which 


i  See  Exhibit  No.  973,  appendix,  p.  9058,  at  p.  9064. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8733 

have  cooperated  fully  in  the  program.     Nor  will  the  selfishness  of  a  handful 
of  individuals  blight  the  reputation  of  a  whole  community. 

Let  Miami  and  the  Nation  know  who  these  "gouging  few"  are  and  let  the 
results  be  a  lesson  for  others  who  may  be  inclined  to  permit  their  selfishness  and 
greed  to  get  the  better  of  them. 

Was  that  about  the  substance,  Mr.  Weil  ? 

Mr.  Weil.  That  was  the  sum  and  substance  of  the  broadcast; 
yes,  sir.    In  addition  thereto 

Senator  Ferguson  (interposing).  Do  you  know  whom  they  were 
referring  to? 

Mr.  Weil.  Senator,  we  have  made  a  very  thorough  investigation, 
as  a  committee,  for  over  a  period  of  10  months,  and  prior  to  that  time 
for  an  entire  year,  to  determine  who  were  these  people.  The  news- 
papers finally  did  give  us  this  information  or  this  fact :  That  someone 
called  them  over  the  telephone  and  gave  them  this  story;  that  they 
did  not  check  the  story  but  took  for  granted  that  this  was  so,  and 
consequently  published  it.  They  stated  to  us  that  they  would  not  be 
able  to  tell  us  who  was  the  individual  who  phoned  this  information 
in,  but  it  was  someone  in  very  high  position  at  that  time  in  Dade 
County,  an  individual  who  no  longer  is  in  Dade  County;  that  they 
would  get  in  contact  with  this  man  by  telegraph  and  if  he  was  agree- 
able that  his  name  be  given  that  they  would  disclose  his  name. 

Well,  the  gentleman  answered  back  that  he  is  not  agreeable  that  his 
name  be  disclosed. 

Senator  Ferguson.  Did  he  have  any  connection  with  the  Gov- 
ernment ? 

Mr.  Weil.  Not  with  the  United  States  Government  in  official  ca- 
pacity, but  he  might  have  had  some  connection  with  the  civilian  set-up 
of  preparatory  local  defenses,  or  something  on  that  order. 

Senator  Ferguson.  Do  you  know  who  the  man  was  ? 

Mr.  Weil.  I  cannot  definitely  state  that  I  know  who  he  was.  I 
have  my  idea  who  he  was. 

Senator  Ferguson.  What  I  am  trying  to  get  personally  now  is, 
was  this  the  Army's  method  of  doing  this  or  was  it  somebody  else's? 
Did  the  Army  use  this  method  to  get  the  hotels  ? 

Mr.  Weil.  I  cannot  make  the  positive  statement  that  this  was  the 
Army's  method,  but  I  can  make  this  statement :  That  a  few  days  prior 
to  the  appearance  of  the  Miami  Herald  article,  there  was  a  hotel  owner 
by  the  name  of  Joseph  Rose,  part  owner  of  the  Royal  Palm  Hotel, 
from  whom  we  have  secured  an  affidavit,  and  according  to  this  affidavit 
this  Mr.  Rose  states  that  a  Government-employed  civilian  negotiator — 
a  civilian  negotiator  in  the  employ  of  the  United  States  Government 
or  the  War  Department — had  told  him  approximately  on  March  19  or 
20,  in  the  course  of  his  negotiations  with  this  individual  for  his  hotel, 
that  these  fellows  over  here  better  fall  in  line  because  if  this  situation 
does  not  righten  itself  right  quickly  where  these  men  will  accept  what 
they  are  being  offered,  that  in  a  few  days  there  might  be  a  publicity 
campaign  which  this  area,  and  a  particular  group  in  Miami  Beach, 
would  very  much  regret. 

Senator  Ferguson.  Who  is  the  officer  that  Rose  was  talking  about? 

Mr.  Weil.  The  gentleman  was  not  an  officer,  but  a  civilian  employee 
of  the  Government. 

Senator  Ferguson.  Who.  is  he  ? 

Mr.  Weil.  John  Frazure. 


8734     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

Senator  Ferguson.  What  was  his  capacity  ? 

Mr.  Weil.  At  that  time  he  was  employed  as  a  civilian  employee,  a 
civilian  negotiator  of  the  real-estate  department  of  the  War  Depart- 
ment. 

Senator  Ferguson.  Frazure  is  supposed  to  have  told  Joseph  Rose 
this  story  ? 

Mr.  Weil.  Yes,  sir. 

Senator  Ferguson.  Is  Rose  here  now  ? 

Mr.  Weil.  I  believe  Mr.  Rose  is  here,  yes ;  Mr.  Rose  is  in  this  room. 

The  Acting  Chairman.  What  I  want  to  get  back  to  is  this:  That 
apparently  this  write-up,  this  story  here  in  the  newspaper,  a  front- 
page story,  states  that  there  were  only  five  or  six  hotels  being  charged 
with  not  having  agreed,  and  apparently  contracts  had  been  entered 
into  with  200  hotels  up  to  that  time. 

Mr.  Weil.  Senator,  that  is  an  erroneous  impression. 

The  Acting  Chairman.  It  is  not  an  impression ;  it  is  a  factual  state- 
ment in  the  paper.     Is  the  paper  misrepresenting  ? 

Mr.  Weil.  Then  the  newspaper  has  not  been  informed  correctly 
and  perhaps  would  only  strengthen  the  remark  I  made  before  to  the 
effect  that  they  did  not  check  statements  before  they  printed  them, 
because  at  that  time,  which  was  about  March  23,  there  were  not  200 
leases  made.  I  don't  believe  that  they  had  spoken  to  perhaps  more 
than  75  or  80  men,  if  that  many.  The  Army  came  in  here,  to  the  best 
of  my  recollection,  on  February  18,  1942.  They  had  only  taken  over 
five  or  six  hotels  and  between  February  18  and  March  23,  1942,  the 
date  of  this  very  unfavorable  publicity,  there  was  only  a  limited  num- 
ber of  Army  and  civilian  negotiators  visiting  the  various  hotels  and 
speaking  with  owners  in  an  effort  to  determine  as  to  what  they  could 
do  in  the  taking  over  of  these  hotels.  As  far  as  these  five  or  six  men- 
tioned here  are  concerned,  I  would  like  to  make  this  statement  now : 
There  were  no  such  five  or  six,  there  wasn't  even  one.  We  have 
determined  that. 

Senator  Ferguson.  Then  you  claim  the  fact  was  that  there  was  no 
one  trying  to  hold  up  the  Government  ? 

Mr.  Weil.  There  was  no  one  trying  to  hold  anyone  up.  The  co- 
operation of  hotel  owners  with  the  Government  was  indeed  of  very 
high  order. 

The  Acting  Chairman.  Mr.  Weil,  I  was  not  trying  to  seek  out  any 
five  or  six  hotels  mentioned  in  this  story.  The  point  I  was  trying  to 
get  into  this  was  if  this  paper  correctly  quotes  the  facts  here,  there 
could  be  only  five  or  six  complainants  that  complain  that  they  were 
coerced,  because  apparently  the  coercion  did  not  appear  until  after 
200,  they  say  here,  had  signed  up,  and  I  am  just  wondering  who  was 
doing  the  coercing,  and  whether  or  not  it  was  actually  the  Army,  or 
whether  there  was  a  pressure  right  here  in  Miami  and  Miami  Beach 
by  business  interests  within  Miami  Beach  and  Miami  that  were  coerc- 
ing their  own  hotel  people,  if  there  was  coercion  used.  That  is  the 
story  I  am  driving  at.     It  appears  to  be  indicated  by  this  right  here. 

Mr.  Weil.  All  right,  sir.     May  I  for  a  moment  see  the  article? 

The  Acting  Chairman.  That  was  March  24,  1942,  the  Daily  News, 
city  edition,  photostatic  copy.  It  is  boxed  in  on  the  middle  of  the 
page. 

Senator  Ferguson.  Is  Mr.  Spooner  here  ? 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8735 

Mr.  Morris  A.  Spooner.  Yes,  sir. 

Senator  Ferguson.  Will  you  state  how  many  hotels,  for  the  record, 
they  had  on  March  22  or  24  ? 

Mr.  Spooner.  I  cannot,  sir ;  I  was  not  employed  by  the  Government 
at  that  time.     We  can  furnish  that  later  on. 

Senator  Ferguson.  You'd  better  take  March  22,  23,  and  24, 1942. 

The  Acting  Chairman.  What  time  does  the  city  edition  come  out  ? 

Mr.  Weil.  Sometime  in  the  afternoon. 

Senator  Ferguson.  We  were  given  a  Miami  Herald  editorial  of  the 
24th ;  that  is  a  morning  paper  and  it  is  somewhat  to  the  same  effect. 

Mr.  Weil.  Of  course,  Senators,  what  happened  after  March  23  is 
entirely  different  from  what  happened  before  March  23. 

The  Acting  Chairman.  Was  March  23  the  date  of  the  radio  broad- 
cast ? 

Mr.  Weil.  March  23  was  the  date  when  the  Miami  Herald  came  out 
with  the  news  first.  That  was  the  first  public  announcement  of  it, 
and  the  afternoon  of  the  same  day  the  radio  broadcast  was  made  to 
which  I  have  referred. 

Senator  Ferguson.  Is  this  a  fact,  quoting  the  Herald's  editorial : 1 

The  hotel  operators  agreed  to  a  plan  under  which  their  properties  were  to  be 
taken  over  as  needed  and  they  would  be  paid  essentially  a  return  equivalent  to 
the  interest  on  their  deed,  their  taxes,  and  insurance,  and  a  little  more.  Pay- 
ment was  not  to.  exceed  a  maximum  of  $10  per  man  per  month,  an  average  of 
three  men  were  to  be  assigned  to  a  room.  The  Government  agreed  to  maintain 
the  property,  to  return  it  in  sound  condition,  and  to  use  only  basic  furniture, 
and  the  mortgageholders  generally  agreed  upon  extension  of  principle  payments 
as  long  as  the  interest  was  paid. 

Do  you  know  anything  about  whether  that  was  a  fact  ? 

Mr.  Weil.  I  do  know  quite  a  bit  about  that. 

Senator  Fecguson.  Was  the  Government  trying  to  deal  through  the 
association  ?    Was  there  an  association  at  that  time  ? 

Mr.  Weil.  At  that  time  they  had  what  we  used  to  call  the  Miami 
Beach  Hotel  Association,  not  to  be  confused  with  the  Miami  Beach 
Hotel  Owners  Association.  The  membership  of  the  organization  con- 
sisted of  hotel  managers,  lessees,  and  some  hotel  owners.  When  it  be- 
came apparent  that  the  Army  was  moving  into  Miami  Beach,  and  as 
these  hotels  were  taken  over,  with  managers  losing  their  jobs,  many 
of  them  enlisting  in  the  services  of  the  Government,  and  many  others 
leaving  the  city  at  the  time  their  hotels  were  taken  over,  the  Miami 
Hotel  Association  was  disbanded  and  has  nothing  to  do  whatsoever 
with  the  Miami  Beach  Hotel  Owners  Association.  The  Miami  Beach 
Hotel  Owners  Association  was  formed 

Senator  Ferguson  (interposing) .  But  did  the  association  that  they 
had  at  that  particular  time  function  ? 

Mr.  Weil.  It  didn't  function  with  regard  to  this. 

Senator  Ferguson.  Were  you  a  member  of  it  ? 
_  Mr.  Weil.  At  the  time  I  was  not  a  member  any  longer  of  that  asso- 
ciation.    I  was  a  member  for  many  years,  and  one  of  its  directors, 
but  at  that  particular  time  I  had  resigned  my  membership. 

The  Acting  Chairman.  In  other  words,  that  first  association  was 
what  might  be  called  a  managerial  association  of  operators  as  com- 
pared to  the  present  association  of  strictly  owners  ? 

1  See  Exhibit  No.  975,  appendix,  p.  9076,  at  p.  9081. 


8736     INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM 

Mr.  Weil.  Yes,  sir. 

Sanator  Ferguson.  Who  was  the  president  of  the  association  actually 
operating  at  that  time  ? 

Mr.  Weil.  The  president  of  that  association  at  that  time  was  John 
Duff.  Mr.  Duff  at  the  time  was  colessee  with  many  other  partners 
of  the  Cromwell  Hotel  at  Miami  Beach.  He  was  president  for  a 
short  time  at  the  time  of  the  Miami  Beach  Hotel  Association  and,  of 
course,  in  that  capacity,  as  it  later  developed,  more  or  less  made  the 
headlines  and  the  contacts  with  the  Army  officials,  and  so  forth,  and 
so  on. 

Senator  Ferguson.  But  he  did  act  as  the  representative  of  the  vari- 
ous hotel  people  ? 

Mr.  Weil.  He  did  not  act  as  an  authorized  representative  of  hotel 
owners.  He  may  have  acted  as  a  representative  of  that  association 
which  consisted  primarily  of  operators,  managers,  and  a  few  hotel 
owners. 

Senator  Ferguson.  Wouldn't  you  class  a  lessee  in  the  same  position 
as  the  lessor?  He  has  to  get  his  rent  and  the  basic  rent  is  insured, 
in  a  way. 

Mr.  Weil.  I  would  not  classify  a  lessee  in  the  same  category  as  the 
owner  of  the  property. 

Senator  Ferguson.  The  lessor  could  hold  him  for  any  deficiency? 

Mr.  Weil.  Only  to  the  extent,  perhaps,  of  the  security  put  up  or  to 
the  extent  of  the  man's  personal  value,  of  his  own  financial  stability, 
and  usually  people  of  considerable  financial  stability  don't  lease 
hotels.    They  buy  them. 

The  Acting  Chairman.  Let  me  call  your  attention  to  another  story. 
Before  I  do  that,  how  many  people  in  this  room,  prior  to  noon  on 
March  24,  signed  leases  with  the  Army  on  hotels  ?  Will  you  hold  up 
your  hands  ? 

Senator  Ferguson.  Will  you  give  your  names  for  the  record  ?  This 
is  prior  to  noon  on  March  24, 1942. 

Mr.  Humpage.  F.  I.  Humpage.  I  represented  the  owners  of  the 
Boulevard  Hotel. 

Mr.  Katz.  Samuel  Katz,  Plymouth  Hotel. 

Senator  Ferguson.  You  represented  the  Boulevard  Hotel,  Mr. 
Humpage  ? 

Mr.  Humpage.  Yes,  sir. 

Mr.  Halley.  Mr.  Humpage,  did  you  also  represent  a  number  of 
hotels  which  had  not  signed  leases  at  that  time? 

Mr.  Humpage.  I  did,  sir. 

The  Acting  Chairman.  I  would  like  to  know  who  signed  leases 
after  the  24th.     There  seem  to  be  28  who  had  their  hands  up. 

Senator  Ferguson.  Put  the  name  of  the  hotel,  the  day  you  did  sign 
the  lease,  on  the  paper  which  will  be  passed  around. 

The  Acting  Chairman.  We  will  pass  around  a  paper ;  please  indicate 
your  names  and  addresses.  You  might  print  them  so  that  they  will 
be  legible. 

(The  list  of  individuals  signing  leases  after  March  24,  1942,  was 
marked  "Exhibit  No.  961"  and  is  included  in  the  appendix  on 
p.  9021.) 

Mr.  Weil.  In  order  to  clarify  the  situation  I  might  state  this: 
That  prior  to  March  23,  1942,  and  as  early  as  February  18,  1942,  the 
Army  arrived  at  Miami  Beach  and  occupied  approximately  five,  six, 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8737 

or  seven  hotels,  among  them  the  Boulevard,  the  Allen,  the  Plymouth, 
the  Collins-Plaza,  and  a  few  others  in  the  same  locality,  to  take  care 
of  the  first  contingents  of  officer  candidates.  These  first  negotiations 
with  the  first  five  or  six  hotel  owners  apparently  were  very  amicable, 
and  also,  it  seems  that  the  rentals  paid  were  somewhat  higher  than 
those  which  were  entered  into  after  March  23, 1942.  As  to  how  much, 
if  anything,  for  that  matter,  the  Army  personnel  had  to  do  with  the 
bringing  about  of  this  very  unfavorable  and  unfortunate  publicity. 
of  course,  I  cannot  state,  other  than  I  have  stated  before  that  3  or  4 
days  prior  to  the  first  appearance  of  this  publicity  a  Government  em- 
ployee— civilian  employee — who  was  a  negotiator  had  made  the  re- 
mark to  a  Mr.  Rose,  owner  or  part  owner  of  the  Royal  Palm  Hotel, 
that  unless  these  fellows  began  falling  in  line  very  quickly  there  would 
be  some  very  unfavorable  publicity,  or  something  to  that  effect.  We 
filed  an  affidavit  by  Mr.  Rose,  I  believe,  during  the  hearing  last  year. 
I  may  explain  to  you  gentlemen  that  in  Miami  Beach  we  have  a  very 
peculiar  situation.  I  refer  to  the  first  article  of  the  Miami  Herald 
and  others  to  follow,  wherein  it  is  stated  that  certain  hotel  owners 
south  of  Twentieth  Sreet x — in  other  words,  certain  hotel  owners  in  a 
certain  area — are  refusing  to  cooperate  with  the  Government,  have 
hiked  their  rates,  and  I  should,  as  a  matter  of  fact,  like  to  call  your  at- 
tention to  a  cartoon  which  one  of  these  newspapers  placed.  Here  is 
one  of  them  [indicating  document]  ;  here  is  another  one  [indicating 
document] .  It  shows  the  hotel  man  with  a  big  chisel  on  his  back,  and 
particularly  those  hotel  owners  who  owned  property  south  of  Twen- 
tieth Street. 

I  want  to  explain  to  you  the  significance  of  that  particular  situation. 
Senator  Ferguson.  That's  the  cartoon  in  the  News.    On  the  same 
page  is  the  front-page  editorial,  "Who  Are  They?'12  Is  that  correct? 
Mr.  Weil.  Yes. 

Senator  Ferguson.  And  that  is  under  a  date  line  of  March  24  ? 
Mr.  Weil.  That  is  right;  March  24. 
The  Acting  Chairman.  Go  ahead. 

Mr.  Weil.  After  the  Miami  Herald  had  published  on  the  morning 
of  March  23  this  news,  that  we  refused  to  cooperate  over  here  and  that 
certain  hotel  owners  in  certain  localities  refused  to  cooperate,  a  meet- 
ing was  called  that  same  afternoon  at  the  Cromwell  Hotel  and  ap- 
proximately 300  Miami  Beach  hotel  owners  were  present,  out  of  a 
total  of  325  or  330. 

The  Acting  Chairman.  That  was  immediately  following  this? 
Mr.  Weil.  Immediately  following  this  publicity.  The  meeting  was 
presided  over  by  one  Bryan  Hanks,  at  that  time  chairman  of  the 
Dade  County  Defense  Council.  Mr.  Hanks,  in  his  opening  statement 
at  this  meeting  and  by  the  things  he  said  during  the  meeting,  reduced 
the  opinion  of  this  entire  situation  as  follows :  He  said  that  when  we 
started  negotiating  with  a  few  hotels,  such  as  the  Peter  Miller,  the 
Fisher  interests  and  Collins  and  others,  we  had  no  trouble  whatsoever, 
but  the  minute  we  went  south  of  Eighteenth  Street — and  while  he 
didn't  mention  any  names  he  might  just  as  well  have  said  the  Gold- 
bergs and  the  Cohens —  then  we  started  running  into  trouble.  That  is 
what  south  of  Eighteenth  Street  generally  means  in  Miami  Beach.    It 

1  Exhibit  No.  973,  appendix,  pp.  9058-9059. 

2  Ibid,  p.  9064. 


8738     INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM 

is  very  plain  and  evident  that  what  they  were  driving  at — and  you 
gentlemen  can  very  readily  realize  that  as  far  as  any  sectarian  group 
is  concerned,  the  particular  group  I  am  referring  to  also  has  sectarian 
responsibilities 

The  Acting  Chairman  (interposing).  I  get  what  you  are  driving 
at  by  your  reference  to  the  Goldbergs  and  the  Cohens.  You  mean 
that  south  of  Eighteenth  Street  the  management  was  largely  Jewish 
and  north  of  Eighteenth  Street  the  management  was  not.  I  did  not 
get  what  you  were  driving  at  at  first.  I  thought  you  meant  some- 
one named  Goldberg  and  someone  named  Cohen  owned  most  of  the 
hotels. 

Mr.  Weil.  The  greater  percentage  of  hotels  south  of  Twentieth 
Street  in  Miami  Beach  is  in  the  hands  of  American  citizens  of  Jewish 
faith.     That  is  not  the  same  case  north  of  Eighteenth  Street. 

The  Acting  Chairman.  I  am  glad  you  used  that  expression.  I  like 
that  expression  much  better. 

Mr.  Weil.  So  you  can  readily  see  what  effect  this  publicity  had  not 
only  upon  the  people  of  that  particular  faith,  but  on  all  of  Miami 
Beach,  and  especially  so  when  Mr.  Malone  that  same  afternoon  gets 
on  the  radio  and  insists  that  the  names  of  these  people  must  be  made 
known  so  that  "We  can  come  over  there  and  take  their  buildings  down 
stone  by  stone." 

Mr.  Halley.  Mr.  Weil,  do  you  make  the  contention  that  because 
a  particular  group,  in  order  either  to  preserve  or  enhance  its  reputa- 
tion, entered  into  a  bargain,  that  bargain  should  be  broken  if  the 
bargain  was  entered  into  freely  and  voluntarily  ? 

Mr.  Weil.  Will  you  repeat  that  ? 

Mr.  Halley.  My  point  is  this :  If  a  group  of  people — any  group — 
enter  into  a  bargain  freely  and  voluntarily,  assuming  their  motive 
is  one  to  enhance  or  preserve  their  reputation,  do  you  feel  that  that 
bargain  is  one  that  should  later  be  broken  ? 

Mr.  Weil.  No,  sir ;  a  bargain  should  not  be  broken. 

Mr.  Halley.  I  would  like  to  know  whether  you  feel  there  are  ele- 
ments in  the  situation  which  make  the  deal  one  which  was  not  entered 
into  freely  and  voluntarily  ? 

Mr.  Weil.  Because  of  the  situation  created,  the  deals  after  March  23 
were  not  entered  into  freely  and  voluntarily,  as  far  as  a  man's  mind 
and  morale  and  general  feeling  were  concerned. 

Mr.  Halley.  Do  you  make  the  point  that  one  of  the  contracting 
parties  took  advantage  of  a  situation  that  existed  ? 

Mr.  Weil.  Yes,  sir ;  I  do  make  that  point. 

Mr.  Halley.  Beyond  that  point,  though,  you  would  not  contend 
that  where  a  man  enters  into  an  agreement  in  which  he  makes  a  poor 
bargain,  no  matter  what  his  motive,  he  ought  to  back  out  of  that 
agreement  ? 

Mr.  Weil.  No  man  should  back  out  of  any  bargain  or  agreement  he 
made,  unless  he  was  forced  into  it  against  his  will,  a  situation  such 
as  I  am  now  explaining. 

Mr.  Halley.  I  think  you  should  elaborate  on  the  circumstances  and 
the  reason  you  feel  that  these  agreements  were  entered  into  against  the 
will  of  any  person. 

Mr.  Weil.  All  right.  To  give  you  an  outstanding  example,  after 
this  meeting  of  March  23  at  the  Cromwell  Hotel,  there  was  a  meeting 
called  of  somewhere  between  30  and  40  hotel  owners,  American  citi- 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8739 

zens  of  Jewish  faith,  at  the  Sea  Isle  Hotel.  At  that  meeting  it  was 
pointed  out  that  we  were  finding  ourselves  indeed  in  a  very  precarious 
position,  and  that  it  was  very  likely  possible  that  unless  this  situa- 
tion could  be  stopped  or  gotten  into  hand  perhaps  there  might  be 
some  violence  and,  therefore,  one  of  the  men  present  suggested  and 
made  a  motion  that  the  United  States  Government  should  be  offered 
these  50  hotels  at  $1  per  year  for  the  duration  of  the  war,  in  order  to 
prove  that  none  of  us  had  any  such  ideas  or  conducted  ourselves  as  the 
newspapers  had  accused  us  of  doing.  Of  course,  that  motion  was 
downed  simply  for  the  reason  that  many  of  us  there  felt  this:  We 
know  that  we  are  willing  to  cooperate  with  the  Government.  We 
have  thus  expressed  ourselves  to  Lieutenant  Talley,  the  first  repre- 
sentative of  the  War  Department  sent  down  here.  That  was  ex- 
pressed in  two  meetings  on  February  14  and  15.  On  those  2  days 
we  had  a  rather  representative  group  present  at  the  meetings  of 
hotel  owners.  We  were  called  in  and  were  asked  how  we  felt  about 
the  Army  coming  to  Miami  Beach  and  using  the  housing  facilities. 
Unanimously — 100  percent — Lieutenant  Talley  was  told  by  those 
present  that  we  were  not  only  welcoming  the  Army  of  the  United 
States,  but  that  if  necessary  we  would  vacate  our  hotels  within  24 
hours  of  all  civilian  guests.  The  majority  of  the  hotels  were  filled 
at  that  time  at  high  winter  rates,  so  it  was  not  a  question  that  the 
money  consideration  came  before  the  consideration  of  patriotic  duty 
of  an  American  citizen. 

Mr.  Hallet.  I  understand  that,  but  the  point  I  am  making  is  this : 
As  a  result  of  your  patriotic  feeling,  you  entered  into  a  certain  lease. 
Take  your  own  situation.  Your  patriotic  feeling  may  have  been  en- 
hanced because  of  attacks  made  upon  you  by  persons  who  may  or  may 
not  have  been  authorized.  Having  entered  into  that  lease  because  of 
your  patriotic  feelings,  do  you  feel  there  are  any  additional  circum- 
stances that  would  warrant  your  backing  out  now  because  of  change 
and  because  patriotism  may  not  now  be  quite  the  same  as  it  was  ? 

Mr.  Weil.  In  my  own  particular  case,  and  I  believe  it  is  the  average 
case  in  Miami  Beach,  I  have  never  changed  my  mind.  I  am  not  com- 
ing today  as  a  matter  of  hindsight  and  saying  I  should  have  gotten 
more  money.  I  have  expressed  myself  before  I  signed  the  option  and 
before  I  signed  the  lease  that  the  amounts  offered  me  are  not  sufficient 
for  me  to  meet  the  necessary  carrying  charges,  and  that  there  would  be 
nothing  left  for  me  at  all  to  live  on.  I  have  said  that  I  would  get  no 
return  on  my  money.  I  was  not  looking  for  6  percent  or  10  percent 
or  anything,  but  I  was  looking  to  Uncle  Sam  to  see  to  it  that  as  a 
result  of  this  situation  my  two  youngsters,  my  wife  and  myself,  will 
not  have  to  go  begging,  borrowing,  or  stealing,  and  I  have  not 
changed  my  mind. 

Mr.  Hallet.  Did  you  express  yourself  in  that  way  when  you  signed 
the  lease? 

Mr.  Weil.  I  did  express  myself.  As  a  matter  of  fact,  I  refused  to 
sign  the  lease,  and  I  was  told  that  unless  I  would  sign  that  lease  I 
would  not  receive  any  rental  payments. 

Senator  Ferguson.  Did  they  say  they  would  take  your  property  and 
not  give  you  any  payment  ? 

Mr.  Weil.  Senator,  the  Army  moved  into  Miami  Beach  hotels  under 
option. 


8740     INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM 
SUKFSIDE  HOTEL,  MIAMI  BEACH ACQUISITION  BY  ARMY 

Senator  Ferguson.  I  am  talking  about  your  own  particular  hotel. 

Mr.  Weil.  The  Army  had  already  occupied  the  hotel  in  which  I  am 
interested. 

Mr.  Halley.  But  they  had  clone  that  under  option  which  you  signed. 

Mr.  Weil.  Under  an  option  which  I  signed. 

Mr.  Halley.  Did  the  lease  differ  from  the  option  in  any  way  ? 

Mr.  Weil.  The  lease  differed  in  many  respects. 

Mr.  Halley.  Will  you  enumerate  them? 

Mr.  Weil.  The  lease  differed,  in  the  first  instance,  in  respect  to  the 
fact  that  it  contained  a  30-day  cancelation  clause  at  any  time  the  Gov- 
ernment might  see  fit  to  cancel  that  lease.  Not  only  was  I  told,  to 
begin  with — I  and  all  of  us — that  these  leases  are  going  to  be  yearly 
leases,  but  we  were  told  that  these  leases  may  staj7  in  effect  for  as  long 
as  6  months  after  the  cessation  of  hostilities. 

Mr.  Halley.  Mr.  Weil,  one  of  the  witnesses  here  on  Wednesday,  a 
witness  from  St.  Petersburg,  offered  a  copy  of  an  option  which  he  re- 
ceived and  which  did  have  the  30-day  clause.  In  order  to  clarify  the 
record,  will  you  submit  copy  of  your  option,  if  you  have  it? 

Mr.  Weil.  Yes,  sir.  You  see,  when  the  Army  moved  into  St.  Peters- 
burg, as  all  of  us  naturally  will  learn  by  experience,  they  had  by  that 
time  learned  by  experience  and  consequently  included  that  clause  in 
the  option. 

Mr.  Halley.  Then  it  is  your  point  that  if  the  lease  had  been  the 
same  as  the  option  you  would  have  made  no  complaint  ? 

Mr.  Weil.  Oh,  yes;  I  would  have  made  a  complaint.  There  were 
other  conditions. 

Mr.  Halley.  I  say  that  if  the  lease  were  exactly  as  you  had  been 
led  to  believe  it  would  be 

Mr.  Weil  (interposing).  If  the  lease  had  been  that  which  we  were 
given  to  understand  and  very  plainly  told  we  were  to  receive,  I  would 
have  no  complaint. 

Mr.  Halley.  You  refer  to  pressure  as  background,  rather  than  some- 
thing you  feel  in  itself  would  violate  or  make  your  agreement  ineffec- 
tive. 

Mr.  Weil.  That's  correct ;  yes,  sir. 

Senator  Ferguson.  Has  your  lease  been  canceled? 

Mr.  Weil.  No,  sir ;  my  lease  has  not  been  canceled.  I  received  a  re- 
quest for  a  renewal  of  lease  approximately  sometime  during  the  month 
of  May  1943.  I  signed  this  renewal  of  lease,  however,  with  the  reser- 
vation, as  it  so  states  here,  that  this  renewal  of  lease  is  being  signed 
subject  to  the  attached  letters  of  claims.  Again,  on  May  29,  1943,  I 
submitted  in  writing  to  the  War  Department,  to  the  attention  of  Cap- 
tain Holleman,  the  contracting  officer  at  Atlanta,  the  sum  and  sub- 
stance of  my  complaints  and  requested  proper  adjustment  of  those 
claims. 

Senator  Ferguson.  You  will  file  that  as  part  of  your  testimony? 

Mr.  Weil.  Yes,  sir ;  I  shall. 

Mr.  Halley.  Have  you  the  option? 

Mr.  Weil.  Yes,  sir.  The  option  here,  of  course,  is  not  the  original, 
because  I  don't  possess  the  original,  but  it  is  an  exact  copy  of  the  one 
that  was  made  at  the  time  we  were  presented  with  this  option  of  lease. 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE   PROGRAM    8741 

I  had  taken  it  at  that  time  to  my  office  and  had  my  secretary  make  an 
exact  copy  of  it,  and  I  present  it  for  your  inspection  [handing  docu- 
ment to  the  acting  chairman] . 

The  Acting  Chairman.  I  notice  two  blanks  here.  Were  those  filled 
in  or  were  they  left  blank  ?  In  the  option  which  you  signed  were  those 
blank  spaces  there  ? 

Mr.  Weil.  This  is  an  exact  copy  of  what  I  signed. 

The  Acting  Chairman.  Will  you  file  this  with  your  testimony  ? 

Mr.  Weil.  Yes,  sir. 

Mr.  Weil.  I  would  also  like  to  file  a  copy — at  least  I  believe  you  re- 
quested me  to  do  so — of  the  renewal  of  the  lease  and  the  letter  attached 
thereto. 

The  Acting  Chairman.  Have  you  a  copy  of  the  original  lease  that 
was  executed  pursuant  to  the  option  ? 

Mr.  Weil.  I  have  my  original  lease  with  me.  I  did  not  bring  a  copy 
to  be  filed  here  because  that  is  the  only  lease  we  have. 

The  Acting  Chairman.  So  as  to  get  a  complete  documentary  picture 
of  this  situation,  I  believe  a  copy  of  your  lease  is  needed.  Can  you  fur- 
nish us  a  copy  ? 

Mr.  Weil.  Yes,  sir ;  I  shall  be  glad  to  furnish  it.1 

The  Acting  Chairman.  We  do  not  want  to  take  your  original. 

Mr.  Weil.  When  you  speak  of  that,  Senator,  I  would  like  also  to 
call  attention  to  this  fact,  and  I  was  not  the  only  one  who  made  these 
requests.  I  know  that  the  majority  of  the  people  made  similar  re- 
quests. We  asked  that  the  Real  Estate  Department  here,  prior  to 
signing  these  leases,  furnish  us  with  copies  of  leases  prior  to  the  date 
we  would  have  to  sign  them  so  that  we  should  have  an  opportunity 
at  least  to  look  over  what  we  were  signing,  and  we  were  told  that 
they  were  not  available;  that  they  could  not  be  given  out,  but  that 
we  would  be  given  time  to  read  them  at  the  time  we  would  be  called 
in  to  sign  them.  In  our  particular  instance,  which  is  just  one  of  the 
average,  we  were  called  to  sign  this  lease  at  the  office  of  First  Lieu- 
tenant Hoi  1  eman,  representing  the  Real  Estate  Department  of  the 
Army  Air  Corps.  We  were  handed  this  lease  in  triplicate.  There 
were  four  of  lis  to  read  it,  of  course.  I  made  protest  at  the  time 
that  this  lease  did  not  contain  the  provisions  under  which  we  agreed 
to  lease  this  building,  and  I  was  told  that  unless  I  signed  this  lease  I 
would  not  receive  my  money.  Of  course,  at  that  time  it  was  too  late 
for  me  to  make  up  my  mind  whether  I  should  or  should  not  sign.  I 
signed  it  because  the  Army  was  already  in  there.  I  do  not  own  the 
building  free  and  clear,  and  while,  of  course,  my  financial  condition  is 
such  that  I  did  not  have  to  worry  about  next  week  or  half  a  year 
from  now,  still  I  had  to  look  forward  in  the  course  of  reasonable 
time  to  meet  my  amortization  payments,  interest  and  taxes,  and  so 
forth,  and  consequently  we  were  forced  to  sign. 

Senator  Ferguson.  Was  your  original  rental  $43,750? 
Mr.  Weil.  $43,750  was  the  sum  representing  two  pieces  of  prop- 
erty, one  being  the  Surf  side  Hotel,  a  125-room  hotel,  and  the  other 
being  a  piece  of  property  adjoining  to  the  north  of  the  Surf  side 

1  Data  concerning  the  Surfside  Hotel  were  subsequently  furnished  to  the  committee, 
marked  "Exhibit  No.  1075,"  and  appears  in  the  appendix  on  p.  9258. 


8742     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

Hotel,  having  a  private  residence  on  it.  The  Army  later  on  termed 
it  the  Annex.    We  never  had  a  name  for  it. 

The  Acting  Chairman.  That  is  what  is  called  here  the  Surfside 
and  the  Surfside  Annex  Hotel. 

Mr.  Weil.  For  the  Surfside  it  was  $36,500  and  for  the  annex  it 
was  $7,250. 

Senator  Ferguson.  As  I  understand  it,  your  renewal  of  the  lease 
does  not  change  the  rent,  but  it  does  ask  that  they  take  sheets,  pillow 
cases,  towels,  bath  mats,  kitchen  utensils,  pots  and  pans,  blankets, 
such  articles  becoming  the  property  of  the  Government,  and  that  the 
Government  pay  for  those  at  the  end  of  the  lease  or  compensate  for 
them.    That  is  the  only  complaint  you  had  in  this  renewal,  is  it  not? 

Mr.  Weil.  You  have  the  option,  Senator;  you  don't  have  the 
renewal. 

Senator  Ferguson.  I  thought  you  handed  me  the  renewal. 

Mr.  Weil.  I'm  sorry,  sir,  that  was  the  option  I  was  asked  to  hand 
in  and  this  is  the  renewal.  I  wish  to  make  a  correction  as  a  matter  of 
record;  that  we  are  seeking  in  our  renewal  a  proper  adjustment  of 
rent,  not  only  for  the  new  year  but  also  for  the  year  passed.  We  have 
contended  from  the  very  beginning  that  we  were  not  receiving  suffi- 
cient rent,  not  only  at  the  Surfside.  I  am  speaking  now  of  my  prop- 
erty as  a  general  example  of  all,  because  they  come  under  the  same 
classification,  practically.  Our  particular  claim  in  the  Surfside  is  an 
entirely  different  thing  to  which  I  should  like  to  refer  later,  if  I 
am  permitted  to  continue  with  the  general  situation  here. 

The  Acting  Chairman.  Before  we  continue  with  the  general  situa- 
tion, I  want  to  ask  you  a  few  opinion  questions.  Looking  over  this 
newspaper  publicity,  I  just  want  to  inquire  of  you  if  that  same  situation 
does  not  frequently  arise  in  ordinary  commercial  activities.  For 
instance,  is  it  not  common  for  a  commercial  company  to  come  to  a 
city  and  by  reason  of  holding  one  or  two  cities  one  against  the  other 
get  a  free  site  for  a  plant,  free  sidetracks,  and  things  of  that  kind, 
from  the  chamber  of  commerce?     Is  not  that  rather  common? 

Mr.  Weil.  Senator,  that  perhaps  might  be  a  practice  more  or  less 
common. 

The  Acting  Chairman.  I  want  to  build  that  up  here.  In  other 
words,  it  has  become  somewhat  of  a  common  commercial  practice  to 
play  in  dealing;  in  other  words,  to  get  concessions  of  a  business 
nature  by  such  practices.  That  is  rather  a  common  practice  in  the 
United  States. 

Mr.  Weil.  That  is  possible. 

The  Acting  Chairman.  Do  we  not  find  here  some  of  the  earmarks 
of  that  practice — and  I  am  not  defending  the  practice  or  anything 
else.  But  do  we  not  find  here  some  of  the  earmarks  of  that  practice, 
that  possibly  one  group,  or  three  or  four  or  five  groups  at  Miami  and 
Miami  Beach  were  being  played  off  against  the  hotel  owners'  group, 
and  the  press,  radio,  and  various  other  things,  to  facilitate  the  closing 
of  certain  bargains?  One  group  felt  they  could  benefit  a  great  deal 
by  it,  possibly,  and  they  were  putting  pressure  themselves  through 
the  press,  through  the  radio,  through  the  chamber  of  commerce.  In 
other  words,  the  pressure  was  really  a  local  pressure.  Are  there  not 
r-ome  of  the  earmarks  here  of  that  type  of  pressure?  I  am  not  con- 
demning anybody.  I  am  simply  citing  a  statement  of  fact,  looking 
at  the  psychology  of  this  situation  here. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8743 

Mr.  Weil.  Senator,  what  you  are  setting  forth  deserves  consider- 
able consideration. 

The  Acting  Chairman.  The  reason  I  am  saying  that  is  that,  in 
the  first  hearing,  this  situation  started  cropping  up. 

Mr.  Weil.  But  I  say  that  as  far  as  we  were  concerned,  we  hotel 
owners  in  Miami  Beach  were  dealing  with  our  Uncle  Sam  and  not 
with  our  competitors  in  Miami,  or  with  the  press,  or  with  anybody 
else. 

The  Acting  Chairman.  I  am  not  talking  about  that.  I  am  talking 
about  influence  right  within  Miami  Beach.  Let's  get  back  behind 
the  veil.  Wasn't  it  a  fact  that  there  was  a  knowledge  there  would  be 
a  pretty  big  pay  roll  of  Army  here?  If  they  had  thirty -five  or 
forty  thousand  men,  that  money  would  be  spent  for  merchandise, 
and  so  on. 

Mr.  Weil.  At  that  particular  time,  we  did  not  understand  there 
were  to  be  thirty-five  or  forty  thousand  men  here.  We  didn't  know 
that  until  the  newspapers  came  out.     We  didn't  know  it. 

Senator  Ferguson.  The  cartoon  has  the  soldier  holding 

Mr.  Weil  (interposing).  We  were  told  by  Lieutenant  Talley  on 
February  14  and  15  that  the  present  plans  of  the  War  Department 
would  be  to  bring  somewhere  between  3,500  and  5,000  men  into  Miami. 
Beach  for  officers'  training — officer  candidates. 

The  Acting  Chairman.  Isn't  there  another  angle  also  here?  If  I 
remember  my  news  correctly,  along  in  February  and  March,  in  fact 
later  than  that,  we  were  getting  a  lot  of  sinkings  off  the  coast  here. 
I  happened  to  be  in  the  resort  section  of  Maine  that  summer,  and 
also  was  in  the  South.  There  were  dim-outs,  even  threatened  total 
black-outs;  in  fact,  in  certain  sections  there  was  so  much  oil  on  the 
beaches    you    couldn't    swim    because    of   the   tankers    being    sunk. 

Wouldn't  the  dim-out  and  black-out  ruin  the  merchandising  busi- 
ness and  tourist  trade  in  Miami  ? 

Mr.  Weil.  Strange  to  say,  it  didn't. 

The  Acting  Chairman.  But  the  tourists  were  in  here  when  it 
started.  That  fear  was  expressed  to  me  in  other  parts  of  the  country, 
as  to  the  following  season.  Of  course,  in  the  North  they  were  worried 
about  the  summer — their  season  was  the  summer  season — that  the  fol- 
lowing season  they  were  going  to  have  to  close  up  shop,  just  about. 
Was  there  any  of  that  ? 

Mr.  Weil.  There  was  a  general  feeling,  I  believe,  that  the  following 
season  no  one  knew  what  might  happen.  Some  contended  it  would 
be  a  big  season  and  some  contended  there  wouldn't  be  any  business 
here  at  all. 

Senator  Ferguson.  That's  a  thing  that  was  troubling  their  minds  all 
over  the  Nation.  The  tourists  associations  had  the  same  trouble. 
They  have  suffered  from  the  question  of  gas  rationing. 

Mr.  Weil.  After  all,  we  are  part  of  the  United  States  here  and  our 
reactions  as  citizens  of  this  country  are  the  same  as  it  would  be  in 
Maine  or  California  or  anywhere  else. 

Senator  Ferguson.  Don't  you  think  the  fact  that  they  were  sinking 
ships  right  off  this  shore,  that  the  people  could  see  going  down,  had  a 
lot  to  do  with  these  articles  here  ?  The  United  States,  the  press,  saw 
what  was  going  on.     We  had  to  get  an  air  force  in  a  few  months. 

Mr.  Weil.  That's  right,  we  understood  that. 


8744     INVESTIGATION   OF   THE   NATIONAL    DEFENSE    PROGRAM 

Senator  Ferguson.  They  would  have  to  go  out  and  build  buildings 
or  take  over  these  hotels.  They  decided  it  would  be  much  better  to 
take  the  hotels  because  they  were  here.  Now  the  press  saw  this  thing 
in  a  light,  not  having  any  interest,  and  they  were  very  anxious  that 
these  hotels  be  used.  Today  the  enemy  is  getting  farther  from  our 
shores.  Things  look  a  little  different.  We  are  dealing  now  with  a 
set  of  facts  we  didn't  have  then,  but  can  we  change  contracts  because 
public  opinion  changes  ?  Isn't  that  what  we  have  here  today  ?  It's 
a  question  of  public  opinion. 

It  was  at  a  certain  height,  and  I  can  see  exactly,  with  citizens  stand- 
ing here  in  this  building  and  looking  out  and  Seeing  our  soldiers  die 
and  our  ships  go  down,  that  they  saw  a  thing  in  one  light.  Today  war 
is  farther  away  for  some  people  and  therefore  they  see  them  in  a  little 
different  light  today. 

Should  we  change  contracts  because  public  opinion  changes  ?  As  I 
take  it,  the  press  and  the  radio,  mediums  of  public  opinion,  were  being 
used  here  as  they  were  all  over  the  Nation,  and  we  might  say  that  we 
have  to  praise  the  press  because  they  did  stimulate  thought  in  America 
to  get  people  to  do  what  they  thought  was  patriotic  duty,  that  people 
should  have  done  without  that  stimulation.  But  since  the  press  and 
the  radio  stimulated  that  thought,  can  we  now  say  that  that  was  coer- 
cion ?  Can  a  contract  be  canceled  because  that  was  coercion  ?  Suppose 
that  gas  rationing  up  in  Michigan  caused  a  property  owner  to  sell  his 
resort  property ;  c<an  he  after  gas  rationing  is  off  say,  "I  shouldn't  have 
sold"? 

The  Acting  Chairman.  In  other  words,  Mr.  Weil,  if  the  black  side 
of  the  picture  had  come  true  and  the  newspapers  had  not  written  these 
stories,  would  they  not  have  been  condemned  for  lack  of  foresight  in 
their  news  columns,  possibly,  where  there  is  now  a  feeling  that  coer- 
cion was  being  used  ?  That's  just  the  point.  In  other  words,  from  the 
face  of  this  evidence,  it  looks  as  though  the  charge  is  that  the  news- 
papers and  radio  were  being  used  to  coerce  people,  and  we  must  turn 
our  minds  back  to  the  situation  as  it  existed  at  that  time  in  order  to  get 
the  correct  viewpoint  of  the  newspapers  and  radio  commentators. 

Mr.  Weil.  The  manner  in  which  this  newspaper  publicity,  as  well 
as  the  radio  broadcasts,  was  presented,  setting  up  these  factual  dif- 
ferences, and  so  forth,  wasn't  necessary  at  all  to  arouse  the  cooperation 
and  the  proper  spirit  on  the  part  of  Miami  Beach  hotel  owners  to 
place  their  facilities  at  the  Government's  disposal,  because  long  before 
the  newspapers  had  any  idea  of  pursuing  this  type  of  publicity,  as 
early  as  February  14  and  15,  1942,  when  Lieutenant  Talley  first  came 
down  here  and  spoke  to  a  very  representative  group  of  Miami  Beach 
hotelmen,  they  answered  100  percent,  "Lieutenant,  we  are  ready  to 
cooperate;  we  are  ready  to  turn  our  buildings  over  day  after  tomor- 
row," after  they  had  been  told  by  Lieutenant  Talley  that  the  basis  on 
whicli  the  Government  intends  to  pay  for  the  space  is  the  basis  of  $10 
per  month  per  man,  and  on  the  basis  that  no  more  men  would  be  put  into 
a  room  than  the  cubic  footage  contents  of  a  room  divided  by  600 
cubic  feet. 

Senator  Ferguson.  Then,  do  I  understand  your  complaint  now  is 
that  they  have  put  more  people  in  your  hotels  than  originally  con- 
templated and,  therefore,  the  wear  and  tear  is  greater? 

Mr.  Weil.  That  is  one  of  our  main  complaints,  Senator. 


INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM     8745 

Senator  Ferguson.  Your  lease  provides  for  reasonable  wear  and 
tear,  and  your  complaint  goes  to  what  should  happen  after  they  turned 
them  back,  that  you  should  be  compensated  for  damages  over  and 
above  reasonable  wear  and  tear  of  soldiers,  counting  three  in  a  room, 
or  whatever  the  cubic  or  square-foot  contents  would  be. 

Mr.  Weil.  That  is  only  one  of  the  complaints  and  remedies  we  seek. 

Senator  Ferguson.  As  I  understand  your  statement  here,  when  you 
renewed  your  lease,  you  did  want  your  contract  renegotiated. 

Mr.  Weil.  Yes,  sir. 

Senator  Ferguson.  You  claim  the  rental  was  not  sufficient  even  for 
three  men. 

Mr.  Weil.  That's  correct. 

Senator  Ferguson.  But  the  editorial  says  $10  per  room  per  month 
for  three  men,  and  you  state  that  that  was  a  true  fact,  that  that  is 
what  you  were  told. 

Mr.  Weil.  Yes,  sir. 

Senator  Ferguson.  Then  why  should  you  get  more  than  $10  ? 

Mr.  Weil.  For  the  simple  reason  that  they  had  six  or  eight  people 
in  my  rooms. 

Senator  Ferguson.  That  only  goes  for  the  repair.  You  see,  we 
were  at  war,  and  if  the  Government  found  that  six  men  were  essential 
in  a  room  to  build  up  an  air  force  to  do  what  we  have  done,  we  can't 
say  that  the  Government  didn't  use  good  judgment  on  building  up 
that  air  force. 

All  right.  Now  should  you  have  more  rental  for  the  six  in  a 
room,  or  should  your  room  merely  be  put  back  in  the  condition  that 
it  would  have  been  in  if  only  three  had  used  it  ? 

Mr.  Weil.  I  should  not  receive  more  rental  because  they  put  10 
men  in  the  room;  I  should  receive  the  rental  of  $10  per  month  per 
man.     If  they  put  in  six,  that's  all  well  and  good. 

Senator  Ferguson.  That  goes  to  your  damages  in  the  end. 

Mr.  Weil.  I  should  be  paid  more  in  the  end  for  the  damages  caused 
by  the  accelerated  wear  and  tear  caused  by  this  additional  occupancy. 

Senator  Ferguson.  That's  a  different  thing. 

Mr.  Weil.  Yes,  sir;  but  the  situation  is  almost  uniform  over  Miami 
Beach,  that  we  are  not  receiving  $10  per  man  per  month  on  an 
average  of  two  to  three  men  per  room. 

Senator  Ferguson.  Then  why  did  you  sign  the  lease  for  less  than 
$10? 

Mr.  Weil.  I  signed  the  lease  for  less  than  $10  because  of  conditions 
created  here  that  just  simply  made  it  impossible  for  me  to  follow  my 
own  good  judgment  and  free  will.  There  wasn't  such  a  thing  any 
more. 

Senator  Ferguson.  You  signed  it,  then,  because  of  public  opinion. 

Mr.  Weil.  I  did  not  necesarily  sign  it  because  of  public  opinion  but 
because  of  what  civilian  negotiators  employed  by  the  Government  told 
me,  and  Army  officers  as  well. 

Senator  Ferguson.  What  did  they  tell  you  ?  I  am  talking  about  the 
$10  per  room. 

Mr.  Weil.  All  right,  sir.  At  the  time,  gentlemen,  there  was  a. 
Captain  Fitch  in  charge.  I  had  occasion  to  visit  him  to  discuss  this 
matter  of  the  Surfside  Hotel,  because  as  it  happened  I  had  the  Surf- 
side  Hotel  under  a  10-year  lease,  leased  in  1939  to  an  operator  at  a 

311932—44 — pt.  21 16 


8746     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

rental  of  $51,000  a  year,  with  cash  security  up  at  $51,000  guaranteeing 
that  the  tenant  will  perform  all  the  conditions  of  that  lease  for 
a  period  of  10  years.    The  Army  offered  me  $36,000  instead. 

Senator  Ferguson.  Wait.  Wait.  How  could  you  negotiate  when 
some  other  man  owned  the  lease  for  10  years?  Why  didn't  he  ne- 
gotiate ? 

Mr.  Weil.  Because  I  was  told  they  were  not  dealing  with  lessees, 
that  they  wanted  to  deal  with  the  owners  only.  They  didn't  even  want 
to  talk  to  lessees.  I  had  to  talk  to  the  lessee.  I  had  to  go  to  my  lessee 
and  see  if  I  could  make  arrangements  with  him  for  my  property. 

The  Acting  Chairman.  Did  you  cancel  his  lease  ? 

Mr.  Weil.  No,  I  couldn't.  No;  I  didn't  want  to  cancel  my  lease  be- 
cause this  man  still  had  seven  years  to  go,  but  I  did  finally  make  ar- 
rangements with  my  lessee  to  have  the  lease  temporarily  suspended 
while  the  Army  would  be  in  there.  During  which  time  he  would,  of 
course,  pay  no  rent. 

Senator  Ferguson.  But  he  makes  no  profit. 

Mr.  Weil.  No ;  but  I  have  to  pay  him  interest  on  his  security,  which 
I  didn't  have  to  do  before. 

Senator  Ferguson.  But  you  have  his  security. 

Mr.  Weil.  I  have  it ;  yes. 

Senator  Ferguson.  So  in  fact  the  lessee  has  lost  everything  by  virtue 
of  this. 

Mr.  Weil.  He  has  lost  the  profit  temporarily,  that  is  correct,  yes, 
while  the  Army  is  in  there.  When  I  went  to  see  Captain  Fitch  on  this 
situation,  he  told  me  that  if  this  rental  isn't  sufficient,  that  that  will 
be  entirely  up  to  me  as  to  what  I  want  to  do  with  my  property,  but  he 
wants  to  call  one  thing  to  my  attention,  that  with  the  Army  spreading 
out  over  Miami  Beach,  as  these  various  buildings  are  taken  to  the  right 
and  left  of  me,  there  will  be  a  likelihood  that  the  streets  will  be  closed 
off,  and  they  were  even  talking  at  that  time  of  the  possibility  of  closing 
the  causeways  to  general  traffic  if  that  was  required. 

Now,  facing  that  situation,  I  didn't  have  much  time  or  much  to 
think  about  as  to  what  I  wanted  to  do. 

COMPLAINTS  OF  MIAMI  BEACH  HOTEL  OWNERS  ASSOCIATION 

The  Acting  Chairman.  Let  me  ask  you  on  that :  Was  closing  the 
causeways  to  general  traffic  a  training  measure,  a  defense  measure,  or 
what  kind  of  measure?  In  other  words,  you  have  a  lot  of  private 
homes  on  the  islands.     Would  that  be  closed  to  them  ? 

Mr.  Weil.  Of  course,  they  never  carried  this  measure  out,  but  the 
idea  was  that  if  they  would  carry  through  that  measure,  home  owners 
would  be  given  passes ;  the  same  as  passes  were  given  simply  to  home 
owners  who  were,  let  us  say,  located  along  the  ocean  front  where  these 
ocean-front  highways  were  closed  at  nights,  and  home  owners  would 
still  be  able  to  get  to  and  from  their  homes  by  special  passes. 

The  Acting  Chairman.  I  think  you  probably  overlooked  this.  It 
was  quite  current  along  the  coast  in  those  areas  a  certain  distance  from 
the  ocean  to  keep  from  silhouetting  ships,  because  if  you  allowed  free 
traffic,  the  people  would  drive  with  headlights,  and  it  was  highly 
dangerous  to  the  ships  going  up  and  down  the  coast,  and,  in  fact,  caused 
a  number  of  submarine  sinkings. 


INVESTIGATION   OF    THE    NATIONAL   DEFENSE    PROGRAM     8747 

Mr.  Weil.  Yes. 

The  Acting  Chairman.  Submarines  would  be  guided  by  those 
lights.  That  was  a  defense  measure  that  might  have  been  talked  about 
rather  than  as  a  coercive  threat. 

Mr.  Weil.  Well,  at  that  time,  Senator,  dim-out,  or,  rather,  black- 
out, restrictions  at  the  time  these  negotiations  were  going  on  were  not 
in  effect  as  stringently  as  they  were  later  on.  They  were  still  driving 
around  here  with  un-blacked-out  headlights,  if  I  may  put  it  that  way, 
and  so  forth.    The  restrictions  only  came  to  pass  later  on. 

The  Acting  Chairman.  Rather,  weren't  they  prophesying  that  those 
restrictions  would  come  to  pass? 

Mr.  Weil.  They  were  not  prophesied  by  any  of  the  Dade  County 
civilian  defense  officials  because  they  themselves  didn't  look  that  far 
ahead.     Actually,  no  one  knew  how  this  situation  would  be  handled. 

The  Acting  Chairman.  But  don't  you  think  the  Army  rather  antici- 
pated that  situation  ? 

Mr.  Weil.  I  am  certain  of  one  thing,  if  I  am  permitted  to  state  it 
that  way,  that  the  statements  made  by  Colonel  Fitch — Captain  Fitch 
at  that  time — statements  with  regard  to  these  original  negotiations, 
had  nothing  to  do  whatsoever  with  the  strategy  of  conducting  the  war 
or  with  defense  measures  to  be  taken  along  the  coast,  up  and  down. 
Now,  Captain  Fitch  at  that  time — he  is  now  a  colonel 

Senator  Ferguson  (interposing).  Mr.  Weil,  do  you  contend,  then, 
that  Captain  Fitch  deliberately  told  you  this  as  a  United  States  officer 
to  get  low  rent  for  the  Government,  or  did  he  state  it  because  it  was 
a  matter  of  strategy  that  the  Government  would  use  in  order  to  protect 
the  ships  out  on  the  ocean  and  protect  America  ? 

Mr.  Weil.  As  far  as  I  am  concerned,  the  reaction  I  got  at  the  time — 
and  I  think  there  will  be  hundreds  to  back  that  statement  up — was 
that  he  did  that  deliberately  to  get  that  property  as  cheap  as  he  could. 

Senator  Ferguson.  And  not  as  a  matter  of  trying  to  give  the  facts  as 
they  existed? 

The  Acting  Chairman.  Not  as  a  matter  of  warning  and  statement 
of  possible  strategic  measures  that  might  be  taken  ? 

Mr.  Weil.  No,  sir.  I  will  make  this  statement,  that  the  conduct  of 
those  negotiations,  the  manner  in  which  the  civilian  negotiators,  as 
well  as  Captain  Fitch — and  there  were  many  other  officers,  but  some  of 
the  other  officers,  like  now  Captain  Holleman  (Lieutenant  Holleman 
then)  and  several  others,  didn't  conduct  themselves  in  that  manner, 
they  conducted  themselves,  if  I  may  say  so,  properly  and  with 
dignity — was  unfair  and  unjust  and  as  far  as  Captain  Fitch  was 
concerned,  the  man  was  very  smooth;  he  didn't  use  any  abusive 
language  or  any  threatening  language.  He  was,  indeed,  very  suave. 
I  don't  know  how  to  put  it,  but  he  was  very  clever. 

The  Acting  Chairman.  In  Washington  we  have  to  use  identification 
cards  to  get  to  our  own  offices. 

Mr.  Weil.  There  was  no  question  in  my  mind  at  all  that  the  entire 
procedure,  all  the  remarks  made  were  intended  to  do  only  one  thing, 
and  that  was  to  keep  that  rent  down  as  low  as  possible.  Now,  it 
would  have  been  as  wrong  as  it  could  have  been  if  the  hotel  owners  had 
expected  to  receive  rent  anywhere  near  their  former  returns.  All  we 
wanted,  Senator,  was  to  be  treated  fairly.  We  are  not  speaking  today, 
as  I  said  before,  by  hindsight  rather  than  foresight.     We  were  told 


8748     INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM 

by  Lieutenant  Talley  on  February  14  and  15  that  the  Government 
would  deal  with  and  treat  us  fairly.  However,  none  of  us  expect  to 
receive  former  profits  or  new  buildings  after  the  war  is  over. 

The  Acting  Chairman.  You  had  no  kick  with  Lieutenant  Talley? 

Mr.  Weil.  We  had  no  kick  with  Lieutenant  Talley  as  far  as  our 
contacts  with  him  are  concerned,  not  as  a  negotiator,  but  as  he  himself 
put  it,  as  a  representative  of  the  Chief  of  Staff  of  the  Air  Corps. 
Talley  explained  the  thing  thoroughly  and  courteously. 

Senator  Ferguson.  Before  you  signed  or  after  you  signed  your  lease  ? 

Mr.  Weil.  Before.  Talley  arrived  in  Miami  Beach  on  approxi- 
mately February  12  or  13.  The  first  meetings  called  were  on  Feb- 
ruary 14  and  15. 

Senator  Ferguson.  Did  he  address  whole  groups  of  owners  ? 

Mr.  Weil.  Yes,  sir.  The  meetings  were  conducted  under  the  more 
or  less  chairmanship  of  this  former  Bryan  Hanks,  chairman  of  the 
Dade  County  Defense  Council,  and  after  Mr.  Hanks  made  his  opening 
remarks  he  turned  the  meeting  over  to  Lieutenant  Talley.  Lieutenant 
Talley  expressed  the  fact  that  he  was  here  at  the  order  of  the  War 
Department  to  further  investigate  the  possibilities  of  using  Miami 
Beach  housing  facilities ;  that  from  what  he  had  seen,  and  from  mate- 
rial submitted  to  them,  it  is  apparent  that  this,  area  offers  to  the  Air 
Corps  just  exactly  what  they  are  seeking,  and  that  he  came  here  to  tell 
us  that  the  Government  would  not  be  interested  to  take  over  properties 
on  the  basis  of  condemnation  proceedings,  but  they  would  like  to  come 
in  here  on  the  basis  of  amicable  settlements  and  understandings. 

Senator  Ferguson.  Then  we  can  draw  this  conclusion:  That  here 
was  an  Army  officer  telling  you  that  the  Army  would  come  in  if  they 
could  negotiate  by  agreement  for  the  property,  but  if  they  were  to 
come  in  and  go  through  the  regular  channel  of  court  procedure,  and 
thereby  pay  what  a  jury  or  a  judge  may  give,  that  they  would  not 
come  in.  %  Is  that  correct  ? 

Mr.  Weil.  What  he  meant  by  saying  that  they  don't  want  to  use 
condemnation  proceedings,  I  don't  know. 

Senator  Ferguson.  Under  the  law,  that  is  what  it  would  mean. 
That  was  a  fair  statement  of  fact. 

Mr.  Weil.  It  was. 

Senator  Ferguson.  Everyone  heard  that  at  the  meeting  and  knew  it  ? 

Mr.  Weil.  Everyone  heard  that,  Senator,  and  they  also  heard,  by 
Lieutenant  Talley,  that  the  rental  was  to  be  based  on  $10  per  month 
per  man. 

Senator  Ferguson.  That  would  be  an  easy  matter  for  each  owner 
to  know  whether  or  not  in  the  future  he  was  going  to  get  it.  If  he 
didn't  get  it  and  signed  his  lease,  then  you  claim  he  did  it  under 
coercion. 

Mr.  Weil.  Yes ;  I  do. 

Senator  Ferguson.  Why  ?  Where  is  the  coercion  on  the  part  of  the 
Government  ? 

Mr.  Weil.  For  this  reason :  We  were  told  we  are  now  in  a  war 
emergency  of  considerable  proportions — we  knew  that,  of  course — and 
that  whatever  statements  were  made  prior,  whether  ten  or  fifteen  dol- 
lars per  man  per  month  and  various  other  statements  made,  disregard- 
ing Lieutenant  Talley's  first  statement,  that  as  far  as  rentals  are  con- 
cerned, no  one  except  the  Army  is  going  to  determine  what  they  are 
going  to  pay  on  rent. 


INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM     8749 

In  order  to  clarify  this  remark  I  may  say  this,  that  as  a  result  of 
this  meeting  of  March  23  in  the  afternoon,  a  civilian  coordinating 
committee  was  appointed  in  order  to  help  straighten  out  the  situation 
as  complained  about  by  the  newspapers  to  the  effect  that  the  Army 
negotiators  couldn't  go  much  farther  because  hotel  owners  were 
unreasonable  and  didn't  want  to  cooperate. 

Senator  Ferguson.  We  get  another  fact  then — we  get  a  civilian 
organization  to  deal  with  the  Army ;  is  that  right  ? 

Mr.  Weil.  All  right ;  I  would  like  to  explain  that. 

Senator  Ferguson.  Were  you  a  member  of  that  ? 

Mr.  Weil.  I  was  not  a  member  of  that  committee,  but  I  was  the 
one  who  made  the  motion  in  that  meeting  that  afternoon  that  such  a 
committee  be  appointed  immediately  and  offer  their  cooperation  to 
the  Government  officials  in  order  to  get  the  situation  straightened 
out,  such  as  represented  by  the  newspapers. 

Senator  Ferguson.  What  did  the  committee  do?  Was  the  com- 
mittee representative  of  the  people?  Who  formed  the  committee? 
Did  the  Government  form  it  or  the  people  ? 

Mr.  Weil.  The  committee  was  appointed  by  Bryan  Hanks  and 
John  Duff  and  not  by  the  Government. 

Senator  Ferguson.  Will  you  tell  us  what  happened  ? 

Mr.  Weil.  Now,  the  committee  met  with  Army  officials. 

Senator  Ferguson.  Can  you  give  us  about  the  date  the  committee 
was  formed  ? 

Mr.  Weil.  On  March  23, 1942,  in  the  afternoon. 

Senator  Ferguson.  All  right. 

Mr.  Weil.  That  committee  consisted  of  Miami  Beach  bankers,  real- 
estate  appraisers,  realtors,  and  a  few  hotel  men,  not  many  but  a  few. 
This  committee  proceeded  to  negotiate  or  talk  things  over,  let  me  put 
it  that  way — confer  with  Army  officials — at  that  time  with 
Capain  Fitch  and  others — and  they  arrived  at  the  conclusion,  with  the 
consent  of  the  Army,  that  a  questionnaire  should  be  sent  out  immedi- 
ately to  all  of  the  hotels  in  Miami  Beach  listing  full  information  as 
to  number  of  rooms,  dining  facilities,  other  facilities ;  also  stating  fiscal 
facts  such  as  taxes,  insurance,  mortgages,  interest,  and  so  forth — in 
other  words,  complete  information.  And  they  also  had  a  question  on 
that  questionnaire,  "How  much  do  you  expect  the  Government" — or 
something  to  that  effect — "to  pay  for  your  building  if  leased?" 

The  Miami  Beach  police  force,  or  some  member  thereof,  were  en- 
gaged to  deliver  those  questionnaires  as  quickly  as  possible  to  each 
hotel,  and  that  is  where  the  200-hotel  thing  comes  in.  Everyone,  with 
very  few  exceptions,  filled  those  questionnaires  out  at  once  and  re- 
turned them  within  less  than  24  hours  to  this  committee.  Then  an 
appraisal  board  was  set  up. 

Senator  Ferguson.  That's  where  they  get  the  200  agreeable  to  co- 
operate ? 

Mr.  Weil.  That's  right. 

Senator  Ferguson.  And  apparently  five  or  six  did  not  fill  them  in 
and  return  them. 

Mr.  Weil.  That  has  nothing  to  do  with  the  five  or  six  accused  by 
the  newspaper  whatsoever.  Five  or  six  were  accused  on  March  23, 
long  before  a  committee  was  appointed  or  even  thought  of,  long 
before  anyone  knew  there  was  such  a  thing  as  trouble. 

Senator  Ferguson.  This  was  on  the  24th  ? 


8750     INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM 

Mr.  Weil.  No,  no ;  I  beg  your  pardon ;  that  was  on  the  23d.  They 
just  reprinted  the  original  story  in  the  Herald  which  I  had  here 
a  little  while  ago,  when  the  Herald  came  out — you  will  find  it  there. 
Even  the  Miami  Beach  Daily  Tropics  repeated  the  same  thing,  that 
there  were  the  five  or  six.  The  Miami  Beach  Tropics  was  the  only 
paper  that  made  any  effort  at  all  to  find  out  who  those  people  were. 
The  editor  of  that  paper,  Mr.  John  Montgomery,  definitely  went  to 
the  trouble  of  trying  to  find  out  who  they  were,  and  he  couldn't  find 
out  either,  and  he  really  did  try  to  find  out. 

Senator  Ferguson.  Go  ahead  with  your  committee. 

Mr.  Weil.  It  was  finally  established  by  testimony  given  by  a  Mr. 
Alfred  Stone,  who  was  a  member  of  this  committee.  Mr.  Alfred 
Stone  appeared  before  the  investigating  committee  of  the  Miami 
Beach  Hotel  Owners  Association,  and  he  made  the  statement  that  the 
Army  had  agreed,  through  Captain  Fitch  at  that  time,  that  this 
civilian  coordinating  committee,  by  properly  qualified  real-estate 
appraisers — and  incidentally,  they  had  the  best  one  to  be  gotten,  a  Mr. 
Keefer,  an  outstanding  appraiser  in  this  community,  who  has  over 
a  period  of  many,  many  years  been  used  by  the  United  States  Govern- 
ment in  making  appraisals  of  various  kinds,  he  was  the  chief 
appraiser,  assisted  by  others — make  appraisals.  They  were  told  that 
they  should  make  these  appraisals,  and  that  then  on  the  basis  of 
those  appraisals,  should  figure  a  rental  of  approximately  13  to  14 
percent. 

That  was  done.  Each  hotel — I  don't  think  there  is  a  hotel  today  in 
Miami  Beach  for  which  there  is  not  a  file  in  the  offices  of  the  post  en- 
gineer, on  which  you  gentlemen  will  not  find  an  appraisal  with  the 
original  figures  on  them — every  hotel  was  appraised.  The  amount  was 
put  down  recommended  by  the  civilian  coordinating  committee  to  be 
paid  as  a  fair  rental  and  when  finally  negotiations  were  made 
with  the  individual  owners,  the  Army  offered  anywhere  from  6  to  11 
percent  on  these  appraisal  figures,  only.  In  other  words,  they  were 
underpaying  the  recommended  rentals  of  this  civilian  coordinating 
committee  at  from  20  percent  to  as  much  as  40  percent,  on  the  figures 
suggested,  and  when  Captain  Fitch  was  approached  by  the  civilian 
coordinating  committee,  through  Mr.  Hanks,  chairman  of  the  defense 
council,  and  asked,  "Why  are  you  doing  this  ?  Why  are  you  handl- 
ing this  thing  this  way?  You  agreed  you  would  do  such  and  such, 
and  now  you  are  cutting  our  own  figures,"  Captain  Fitch  answered 
that  his  methods  were  a  military  secret  and  those  are  the  figures  and 
that's  all  there  is  to  it.  That's  the  story  I  got  from  Mr.  Stone  who 
served  on  that  civilian  coordinating  committee. 

There  is  another  statement  X  got  from  the  chairman  of  that  com- 
mittee. 

The  Acting  Chairman.  Just  a  minute.  To  clarify  the  record,  let 
me  ask  you  this :  You  said  from  6  to  11  percent. 

Mr.  Weil.  On  the  appraised  figures. 

The  Acting  Chairman.  That  was  upon  the  appraisal  of  the  civil- 
ian committee? 

Mr.  Weil.  That's  right. 

The  Acting  Chairman.  How  do  you  account  for  the  difference  be- 
tween the  return  of  6  and  11  ?  Was  that  based  upon  the  cut  in  valua- 
tion made  by  Colonel  Fitch?     In  other  words,  sometimes  he  would 


INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM     8751 

cut  more  on  some  property  than  on  other;  as  a  result,  the  return  on  the 
property  that  was  cut  the  most  would  probably  go  down  to  a  6-percent 
return  on  the  appraisal  figure,  whereas  another  appraisal  not  cut  so 
much  according  to  his  valuation  would  get  as  much  as  11  percent. 

Mr.  Weil.  So  I  understand. 

The  Acting  Chairman.  The  cut  value,  in  other  words,  the  different 
valuations  which  he  placed,  meant  a  return  based  upon  the  civilan 
appraisal  of  from  6-  to  11-percent  return. 

Mr.  Weil.  That's  right. 

Senator  Ferguson.  Did  they  use  assessors  ? 

Mr.  Weil.  The  appraisers  used  the  figures  of  the  county  tax  assessor. 

Senator  Ferguson.  The  law  of  Florida  requires  that  the  figures  on 
the  county  assessment  shall  be  the  true  value,  the  real  cash  value, 
isn't  that  true? 

Mr.  Weil.  Senator,  I  am  not  prepared  to  answer  that  question  on 
the  basis  of  knowledge,  but  I  will  say  this. 

Senator  Ferguson.  Does  the  law  go  further  and  require  the  owner  to 
make  a  statement  as  to  the  value  of  his  property  so  that  the  assessor 
has  his  own  statement? 

Mr.  Weil.  No;  the  tax  assessor  of  the  State  and  county,  located 
here  in  Dade  County,  have  their  own  methods  of  making  appraisal. 

Senator  Ferguson.  But  the  law  requires  them  to  make  it  at  the  true 
cash  value. 

Mr.  Weil.  I  don't  know  what  the  law  requires  them  to  make,  but  I 
do  know  they  are  set  up  somewhere  betyeen  80  and  90  percent  of  it. 
That  I  do  know,  because  that  is  what  the  tax  assessor  personally 
told  me. 

Senator  Ferguson.  Somewhere  between  80  and  90  percent  of  its  cash 
value  ? 

Mr.  Weil.  Of  its  value,  actual  value. 

Senator  Ferguson.  You  understand  the  cash  value  to  be  the  value 
to  a  purchaser  ready,  willing,  and  able  to  buy,  but  not  compelled  to, 
from  a  seller  ready,  willing,  and  able,  but  not  compelled  to  sell. 

Is  there  anything  else  you  want  to  tell  us  ? 

Mr.  Weil.  Yes,  sir.  We  were  trying  to  find  out  how  the  now 
Colonel  Fitch,  then  Major  Fitch — this  was  a  few  weeks  after  the 
captain  had  started  and  he  was  then  promoted  to  a  major — arrived  at 
these  figures.  The  only  answer  we  could  ever  get  was  that  it  was  a 
military  secret,  and  here  is  the  most  significant  thing  of  it  all.  This 
Mr.  Duff,  who  was  chairman  of  this  civilian  coordinating  committee, 
who  was  very,  very  friendly  with  not  only  then  Captain  Fitch,  but- 
very  close  to  General  Wooten,  came  to  a  meeting  here  in  January,  and 
while  we  did  not  ask  him  for  any  expressions,  he  voluntarily  stated 
that  by  reason  of  his  former  connections  and  close  working  with  the 
Army  and  civilian  coordinating  committee,  he  wished  to  point  out 
that  from  his  knowledge,  the  hotel  men  of  Miami  Beach  received  the 
rawest  and  most  inequitable  deal. 

Senator  Ferguson.  Is  he  in  Miami  now? 

Mr.  Weil.  He  is  in  this  room.  That  was  based  upon  what  he 
claimed  to  know  to  be  a  fact,  that  the  attitude — this  is  what  Mr.  Duff 
said — of  practically  every  Air  Corps  officer  down  here  toward  hotel 
owners  was  one  of  disrespect,  disregard,  if  not  contempt. 

Senator  Ferguson.  If  Mr.  Duff  is  here,  you  don't  have  to  give  his 
statement.    We  will  ask  him,  and  then  it  won't  be  hearsay. 


3752     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Mr.  Halley.  There  are  just  two  or  three  things  I  would  like  to  ask 
you  about,  Mr.  Weil.  You  mentioned  that  in  the  option  there  was 
no  30-day  cancelation  clause,  whereas  there  was  such  a  clause  in  the 
lease. 

Mr.  Weil.  Yes,  sir. 

Mr.  Halley.  Would  the  30-day  cancelation  provision  decrease  the 
value  of  the  lease? 

Mr.  Weil.  It  would  decrease  it  considerably. 

Mr.  Halley.  And  in  a  lease  with  a  30-day  cancelation  clause,  would 
you  in  effect  seek  a  much  higher  rate  ? 

Mr.  Weil.  Yes ;  I  certainly  would.  As  a  matter  of  fact,  Mr.  Halley, 
there  was  a  congressional  investigation  here  in  October  of  1942,  and 
I  am  making  reference  to  this  particular  investigation. 

Senator  Ferguson.  Did  they  take  testimony  ? 

Mr.  Weil.  Yes,  sir. 
.   Senator  Ferguson.  Not  in  public  hearings. 

Mr.  Weil.  Not  in  public  hearings.  I  have  House  Report  No.  2588, 
House  Resolution  162,  dated  October  20,  1942,  submitted  by  the  Com- 
mittee on  Military  Affairs  of  the  House  of  Representatives.  On 
pages  4  and  5,  under  the  heading,  "For  the  service  command  school 
for  bakers  and  cooks" — I  don't  know  why  that  came  under  this  head- 
ing but  it  covers  Miami  Beach — it  states : 

The  savings  effected  by  the  War  Department  in  the  outlay  of  leases  are  shown 
to  average  24  percent  less  than  the  amounts  paid  for  annual  rentals  by  commercial 
interests  for  corresponding  hotels,  for  which  the  amounts  of  annual  rentals  paid 
by  commercial  operators  and  the  War  Department  are  available.  In  this  group 
of  27  hotels  the  annual  rentals  paid  by  the  War  Department  for  25  hotels  ranged 
from  5  percent  to  37  percent  less  than  the  amounts  of  leases  for  commercial  uses. 

For  example,  a  hotel  which  was  leased  to  a  commercial  operator  at 
the  rate  of  $17,625  a  year  has  been  taken  over  by  the  War  Department 
for  $11,250  a  year. 

Now,  that  is  a  fact,  and  I  may  state  here  that  runs  true  not  only 
with  hotels  which  were  under  lease,  but  also  with  all  others.  Where, 
for  instance,  the  appraisers  had  arrived  at  a  figure,  and  a  fair  figure, 
of  $17,000,  Captain  Fitch  came  back  with  an  approximate  offer  of 
$11,000,  and  said,  "Either  you  take  it  or  else." 

Senator  Ferguson.  Or  else  ?    Did  he  use  that  expression  ? 

Mr.  Weil.  No,  he  did  not  use  that  expression  within  my  hearing, 
but  to  sum  up  many  things  he  did  say,  you  might  say  "or  else." 

Senator  Ferguson.  You  drew  the  conclusion  ? 

Mr.  Weil.  That  is  a  conclusion.    It  states : 

The  War  Department  is  paying  annual  rentals  higher  than  the  commercial 
leases  for  only  2  hotels  in  this  group  of  27  hotels.  In  those  instances,  however, 
it  should  be  noted  that  the  commercial  leases  were  for  a  period  of  10  years, 
whereas  the  War  Department  leases  are  for  the  duration  of  the  emergency,  with 
a  30-day  cancelation  clause. 

I  am  reading  this  to  answer  your  question,  Mr.  Halley.  I  want  to 
say  this,  and  I  am  bringing  this  only  into  the  general  picture  and  not 
so  much  to  talk  about  the  Surfside  Hotel,  but  as  it  happens,  at  the 
Surfside  Hotel  in  which  I  am  interested,  it  was  under  a  bona  fide 
lease  for  10  years,  at  $51,000  per  year,  with  $51,000  cash  security 

Senator  Ferguson  (interposing).  Is  that  lease  in  effect  so  it  will  be 
taken  up  ? 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8753 

Mr.  Weil.  As  soon  as  the  Army  vacates.  I  received  only  $36,000 
a  year,  and  somebody  else  having  10-year  leases  receives  more  than 
his  commercial  leases,  something  I  can't  understand.  I  was  asked 
last  June  to  make  a  statement  to  the  Miami  Beach  Hotel  Owners' 
Association  as  to  what  I  would  really  want  for  my  property,  and  I 
made  this  statement  in  writing,  referring  to  this  particular  situation 
here  as  just  quoted :  That  I  am  not  interested  in  receiving  more  than 
my  commercial  lessee  paid,  although  others  apparently  did  get  more. 
All  I  am  interested  in  is  to  get  what  my  commercial  lessee  paid  for  it. 
That  is  all  I  asked  for,  and  that  is  all  these  men  are  asking  for — all  of 
Miami  Beach  is  asking,  for  one  thing,  to  be  treated  fairly  and  not 
under  conditions  under  which  we  were  compelled  to  do  things  which, 
as  a  matter  of  fact,  didn't  give  us  the  opportunity  even  to  think  any 
more.    That's  the  corner  we  were  pushed  into. 

Senator  Ferguson.  In  other  words,  we  can  boil  that  down  to  this: 
You  are  now  asking  in  behalf  of  the  owners  that  they  get  the  same 
profits  as  they  would  if  there  were  no  war  on. 

Mr.  Weil.  What  was  that? 

Senator  Ferguson.  As  if  there  were  no  war  on. 

Mr.  Weil.  Oh,  no. 

Senator  Ferguson.  You  are  asking  for  the  commercial  lease  value. 

Mr.  Weil.  No,  no ;  I  didn't.  I  didn't  ask  that  these  owners  get  the 
same  rentals  as 

Senator  Ferguson.  As  the  commercial  lease  value. 

Mr.  Weil.  Oh,  yes. 

Senator  Ferguson.  The  commercial  lease  value  would  be  the  same 
as  if  there  were  no  war  on. 

Mr.  Weil.  Well,  Senator 

Senator  Ferguson  (interposing).  Isn't  that  true? 

Mr.  Weil.  That  is  true,  but  on  the  other  hand,  your  own  committee, 
or  rather  a  committee  of  the  Government,  a  congressional  committee, 
comes  down  here  and  pays  for  two  hotels  even  more  than  that. 

The  Acting  Chairman.  That  wasn't  the  committee.  They  reported 
that  much  was  paid.     The  committee  didn't  pay  it. 

Mr.  Weil.  The  committee  reported  that  the  Government  is  paying 
on  two  hotels  more  than  the  two  hotels  had  received  under  commerial 
leases  before  the  war  was  on. 

Senator  Ferguson.  Then  you  would  say  those  two  should  be  cut 
down  and  the  others  put  up? 

Mr.  Weil.  I  wouldn't  say  that  at  all. 

Senator  Ferguson.  Why  not? 

Mr.  Weil.  Because  apparently  the  justification  for  paying  more  is 
that  these  leases  previously  were  for  10  years,  whereas  the  Government 
was  coming  in  on  a  1  year's  lease  basis  on  a  30-day  cancelation  clause.., 

Senator  Ferguson.  Then  you  should  get  more  ? 

Mr.  Weil.  Under  those  circumstances;  yes,  because  if  the  Govern- 
ment chooses  to  move  out  before  this  war  is  over,  and  chooses  to  move 
out  on  the  basis  of  a  30-day  cancelation  clause,  it  is  only  fair  that  they 
should  pay  more  than  a  tenant  who  guarantees  to  stay  10  years  and 
puts  up  a  full  year's  security  on  it. 

The  Acting  Chairman.  Let's  look  at  the  situation  as  it  looked  in 
March  1942.  You  had  a  10-year  lease  on  your  hotel,  $51,000  a  year,  at 
that  time.     You  had  a  1-year  guarantee,  cash  deposit.     Had  the  con- 


8754     INVESTIGATION   OF   THE    NATIONAL    DEFENSE   PROGRAM 

ditions  continued  along  the  coast,  had  we  had  black-outs  and  constant 
sinkings ;  as  a  matter  of  fact,  had  the  sinking  of  tankers  continued  as 
at  that  time,  there  would  have  been  no  gas  to  go  anywhere  and  very 
little  fuel  along  the  coast.  Would  you  not  then,  as  a  good  businessman, 
have  found  it  necessary  to  lower  your  rental  to  your  tenant?  I  know 
they  are  doing  it  in  a  lot  of  communities.  About  a  year  ago  I  was  in 
a  community  where,  although  I  had  a  long-time  contract,  I  had  to 
lower  the  rental  in  order  to  hold  a  good  man  in  the  place  of  business 
and  keep  him  from  going  broke.  I  didn't  want  him  to  go  broke  be- 
cause out  of  his  business  came  the  rental  on  the  building,  a  commercial 
building. 

Numerous  owners  have  suffered  from  transportation  shortages  in 
communities  and  have  had  to  lower  rentals  on  contracts,  as  straight 
commercial  propositions  to  take  care  of  their  tenants'  demands,  be- 
cause a  landlord  must  take  care  of  his  tenant.  You  probably  would 
have  had  to  do  that. 

Mr.  Weil.  I  believe  here  is  what  I  would  have  done :  I  would  have 
reduced  my  tenant's  rental  to  a  lower  figure,  with  the  understanding 
that  when  the  time  comes  that  he  is  making  a  greater  profit  than  antic- 
ipated, that  he  will  at  that  time  catch  up  with  the  reduction  I  granted 
to  him  when  he  didn't  do  so  well. 

The  Acting  Chairman.  Let's  get  down  to  this.  I  don't  know 
whether  you  know  it  or  not,  but  the  utilization  of  existing  properties 
and  facilities  through  the  South,  under  the  program  which  General 
Marshall  initiated  of  utilizing  hotels,  speeded  up  the  training  program, 
particularly  of  the  Air  Force,  by  at  least  6  months,  and  probably  even 
more  than  that,  because  had  we  waited  to  build  cantonments  for  train- 
ing, it  would  have  taken  from  6  to  8  months  to  build  cantonments. 
As  a  result  of  speeding  up  training  of  the  Air  Force,  we  whipped  the 
submarine  menace  on  the  east  coast  as  we  could  not  otherwise  have 
done,  and  our  favorable  condition  here  now,  which  is  probably  largely 
contributing  benefit  to  business  on  the  east  coast,  is  attributable  to  this. 
Therefore,  if  we  had  not  done  this,  we  would  have  had  a  business 
situation  in  Florida  that  was  bad — had  we  not  been  able  to  do  this — 
so  you  have  that  one  rosy  thought  there. 

Mr.  Weil.  Senator,  I  should  like  to  answer  that  by  stating  that 
while  this  local  condition  which  you  pointed  out  might  affect  us  locally, 
after  all,  we  are  still  a  part  of  the  entire  United  States,  and  every 
American  citizen  from  the  very  beginning  of  this  war  had  but  one 
hope,  that  it  may  come  to  an  early  successful  conclusion ;  and  if  it  was 
a  question  that  the  citizens  of  this  community  would  be  called  upon 
to  do  their  share  to  prevent  anything  that  might  happen  on  the  Cali- 
fornia coast,  I  am  sure  you  believe  that  we  would  be  right  on  the  spot 
to  do  it. 

The  Acting  Chairman.  What  I  am  getting  at  is  this :  That  there  is 
one  factor  you  must  take  into  consideration  that  this  very  condition 
that  existed  here  probably  had  some  features  of  negotiation,  but  had 
it  not  been  for  this  moving  in  here,  you  probably  would  have  had  to 
lower  those  commercial  rentals  and  had  them  down  right  now. 

Mr.  Weil.  We  might  have  had  to. 

The  Acting  Chairman.  I  am  not  arguing  with  you;  I  am  telling 
you  facts. 


INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM     8755 

Mr.  Weil.  I  think  you  are  right,  Senator,  but  at  least  we  would  have 
had  a  chance  later  on  to  get  it  back  again  from  the  tenant  as  he  was 
doing  better  business,  a  situation  which  we  cannot  expect  as  long  as 
Uncle  Sam  is  in  here  on  a  yearly  basis  with  a  30-day  cancelation 
clause. 

The  Acting  Chairman.  I  am  not  holding  it  out  that  we  advocate 
that  hotel  owners  in  Miami  Beach  or  Daytona  Beach  or  any  place 
should  pay  the  freight  on  this  training,  but  there  is  that  one  view,  that 
the  Army  did  have  to  get  in  here  in  a  hurry,  and  the  Navy  had  to  do 
the  same  thing.  That  probably  was  the  basic  cause  for  this  hurried 
negotiation.  Had  they  had  a  little  more  time  for  negotiation,  it 
probably  would  have  worked  out  better. 

Mr.  Weil.  When  you  state  that  if  they  had  had  a  little  more  time  for 
negotiation  it  would  have  worked  out  better,  you  had  the  testimony 
given  day  before  yesterday  by  the  gentlemen  from  Daytona  Beach 
and  St.  Petersburg,  on  properties  which  were  taken  over  long  after 
Miami  Beach  properties  were  taken  over,  when  they  had  had  their 
experience  in  Miami  Beach,  when  there  was  no  element  of  hurry  and 
excitement,  and  so  forth  and  so  on.  Those  people,  too,  are  registering 
their  complaints  of  not  having  been  dealt  with  properly  and  rightly, 
and  dealt  with  as  we  as  citizens  of  these  United  States  can  expect  to  be 
dealt  with  by  our  Government,  because  after  all  aren't  we  all  part  of 
this  Government?  Am  I  not  one  one-hundred-and-fifty-millionths 
of  it? 

The  Acting  Chairman.  I  won't  argue  with  you  on  that  or  disagree 
with  you  on  that.    I  was  just  bringing  out  that  one  feature. 

Mr.  Weil.  You  may  rest  assured,  Senator,  that  we  would  not  be 
sitting  here  had  we  gotten  a  half-way  square  deal,  even  if  it  wouldn't 
be  100  percent.  We  are  not  hollering  "Murder"  just  because  the 
submarines  aren't  around  here  any  more.  I  have  spent  the  better 
part  of  a  year  and  a  half  in  all  sincerity  with  an  open  mind  to 

The  Acting  Chairman  ( interposing) .  I  was  telling  you  the  situa- 
tion that  those  fellows  faced  at  that  instant.  They  had  orders  to  get 
in  here,  and  the  question  of  method  seems  to  be  the  critical  question. 

Mr.  Weil.  For  a  year  and  a  half,  Senator,  I  have  been  trying  very 
thoroughly  to  investigate  this  situation,  and  have  listened  to  hundreds 
of  men,  discounting  as  much  of  their  stories  as  could  possibly  be  dis- 
counted, 60  percent  at  least;  but  on  the  other  hand,  there  are  such 
facts,  such  definite  facts  and  so  outstanding  that  it  deserves  a  very 
thorough  investigation  by  your  committee. 

Senator  Ferguson.  That's  why  we  are  here. 

Mr.  Weil.  That's  right.     I  should  like  to  present  one  more  situation. 

Mr.  Halley.  Before  you  get  into  another  situation,  you  were  asked 
about  the  difference  between  the  option  and  the  lease,  and  you  said 
that  besides  that  30-day  clause  there  were  some  further  clauses  in 
the  lease  which  were  not  in  the  option  and  of  which  you  had  no  knowl- 
edge until  you  received  the  lease.  Now,  will  you  state  what  they  were, 
just  briefly  ? 

Mr.  Weil.  If  I  am  permitted  to  look  at  my  lease.  For  instance,  the 
question  of  what  the  Government  will  do  in  the  return  of  these  build- 
ings, speaking  of  wear  and  tear.  We  were  given  to  understand  by 
Lieutenant  Talley — and  the  reason  I  am  referring  to  him  is  because  he 


8756     INVESTIGATION   01'   THE    NATIONAL    DEFENSE    PROGRAM 

was  the  first  and  only  direct  representative  in  uniform  to  tell  us 
what  this  whole  thing  was  going  to  be  about.  Lieutenant  Talley  made 
this  statement,  that  it  was  the  practice,  and  that  he  was  certain  of  it, 
that  these  hotels  would  be  returned  in  the  same  shape  as  they  were 
being  taken  over,  ordinary  wear  and  tear  excepted  only. 

When  he  made  that  statement — I  forget  now  who  replied,  but  I 
can  find  that  out  if  necessary — one  of  the  hotel  owners  stated,  "Now, 
the  term  'ordinary  wear  and  tear'  is  a  rather  ambiguous  term  and 
leaves  room  for  argument." 

Senator  Ferguson.  Just  a  moment.  Isn't  that  a  term  under  the  law 
that  we  have  had  for  a  century?  We  have  got  along  fairly  well  in 
ordinary  business  with  it,  haven't  we? 

Mr.  Weil.  We  have ;  yes,  sir. 

Senator  Ferguson.  I  remember  as  a  judge,  I  had  no  trouble  using  it. 

Mr.  Weil.  That's  correct,  sir. 

Senator  Ferguson.  I  mean  in  interpreting  it. 

Mr.  Weil.  The  term  is  all  right,  but  here  is  what  was  pointed  out. 
Now  these  soldiers  coming  in,  men  being  trained,  are  tired  out  and 
they  naturally  will  not  go  to  these  hotel  rooms  and  treat  the  equipment 
with  the  reasonable  care  the  guest  would  give  it.  These  men  are  not 
expected  to  give  it.  As  a  matter  of  fact,  I  anticipated  and  I  had  told 
my  partner  at  the  time  that  one  thing  we  have  to  get  ready  by  the  time 
these  people  are  through  with  it  are  brand  new  mattresses.  These  men 
come  up  sweaty  and  tired  and  they  flop  on  the  beds  without  a  shower, 
and  consequently 

Mr.  Halley  (interposing).  But  what  were  you  told  when  that  point 
came  up  ? 

Mr.  Weil.  Here's  what  we  were  told :  Lieutenant  Talley  said,  "Now, 
these  men  coming  in  here  are  not  of  the  general  type  of  soldier.  They 
are  all  specially  picked  men — men  who  will  be  officers  in  the  United 
States  Army,  and  men  who  know  how  to  handle  property,  so  that  you 
don't  need  to  worry  that  they  will  burn  up  your  rugs,  and  burn  up 
the  tops  of  dressers,  and  scar  out  the  sides  of  beds,  and  so  forth." 

Mr.  LIalley.  To  get  to  the  lease,  did  the  lease  have  a  term  which 
differed  from  what  you  were  told  at  that  time  ? 

Mr.  Weil.  I  am  looking  for  that  right  now.  I  don't  know  whether 
my  lease  now  has  it,  but  I  do  know  this,  that  I  have  seen  dozens  of 
leases,  70  or  80,  where  this  term  "ordinary  wear  and  tear"  was  stricken 
out  and  in  its  place  was  "wear  and  tear  to  be  considered  as  barracks 
use,"  or  something  to  that  effect. 

Oh,  yes;  I  have  told  you  of  this  cancelation  clause,  of  course.  It 
says  in  the  lease,  under  paragraph  8  [reading]  : x 

The  Government  shall  have  the  right  during  the  existence  of  this  lease  to  make 
all  arrangements,  attach  fixtures  and  erect  additions,  structures,  or  signs  in  or 
upon  the  premises  hereby  leased  (provided  all  alterations,  erections,  or  signs  not 
be  detrimental  to  or  inconsistent  with  the  rights  of  the  owner),  which  fixtures, 
additions,  or  structures  so  placed  in  or  upon  or  attached  to  the  said  premises 
shall  be  and  remain  the  property  of  the  Government  and  may  be  removed  there- 
from by  the  Government  prior  to  the  termination  of  this  lease;  and  the  Gov- 
ernment, if  required  by  the  lessor,  shall  before  the  expiration  of  this  lease  or 
renewal  thereof  restore  the  premises  to  the  same  condition  as  that  existing  at  the 
time  of  entering  upon  the  same  under  this  lease,  reasonable  wear  and  tear  and 
damages  by  the  elements  or  by  circumstances  over  which  the  Government  has  no 
control  excepted ;  provided,  however,  that  if  the  lessor  requires  such  restoration, 
the  lessor  shall  give  written  notice  thereof  to  the  Government  thirty  days  before 
the  termination  of  lease. 


1  See  appendix,  p.  9234,  for  copy  of  a  United  States  standard  form  lease. 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8757 

Now,  it  is  apparent  that  as  far  as  my  particular  property  is  con- 
cerned, they  did  not  take  care  of  it.  In  my  particular  situation  they 
took  care  of  it  in  this  manner,  that  by  the  time  they  finally  gave  us  a 
condition  report  of  the  building,  the  building,  as  far  as  the  Army  was 
concerned,  or  the  officers  who  took  this  report,  was  in  such  condition 
that  they  already  worked  into  a  damaged  building. 

Senator  Ferguson.  How  long  after  you  leased  the  occupancy  did 
you  get  that  report  of  the  building  ? 

Mr.  Weil.  On  the  elevators,  we  didn't  get  it  until  8  to  9  months  after. 
On  the  building  itself,  I  believe  it  was  90  days  after. 

Senator  Ferguson.  How  long  on  the  furniture  ? 

Mr.  Weil.  On  the  furniture,  I  think  they  took  that  before  troops 
actually  were  put  in.  I  believe  my  associate  is  here  who  can  answer 
that  question  better.  I  believe  the  furniture  itself  was  taken,  for  this 
reason,  that  the  Army  officer  going  through  the  premises  designated 
which  parts  of  the  furniture  to  move  and  which  to  leave ;  and  while 
they  were  doing  that  they  were  taking  the  inventory  at  the  same  time ; 
but  I  have  just  been  handed  another,  what  seems  to  be  another  lease, 
and  in  this  lease 

The  Acting  Chairman  (interposing) .  Who  were  the  parties  to  the 
lease  ? 

Mr.  Weil.  The  lessor  is  the  Arnold  Hotel  at  8751  Collins  Avenue,  at 
Miami  Beach.  The  date  of  this  lease  is  December  26,  1942,  made  be- 
tween the  United  States  of  America 

Senator  Ferguson  (interposing).  You  don't  need  to  read  that. 

Mr.  Weil.  All  right,  its  owners.  It  was  in  December  after  they  had 
had  sufficient  time,  by  past  experience,  to  adjust  their  own  affairs, 
too.    Under  heading  "C,"  paragraph  6,  it  reads : 

It  is  understood  and  agreed  that  if  carpets  and  rugs  are  left  in  the  hotel  at  the 
lessor's  choice,  the  lessor  hereby  releases  the  Government  from  any  responsibility 
therefor  and  waives  all  claims  for  restoration  thereof.  It  is  further  understood 
and  agreed  that  the  use  the  Government  makes  of  the  furnishings  as  itemized  on 
the  attached  inventory  will  be  comparable  to  that  of  civilian  hotel  use  and  lessor 
waives  all  claims  for  restoration  of  said  inventory  furnishings,  excepting  where 
damage  exceeds  ordinary  wear  and  tear  and  said  damage  is  applicable  to  negli- 
gence, and  the  usage  of  the  hotel  as  a  barracks  shall  be  considered  ordinary  wear 
and  tear. 

This  is  the  new  paragraph  in  these  new  leases  which  the  Air  Corps 
has  been  able  to  get  out  by  September,  or  perhaps  some  little  time 
before  that,  but  in  these  previous  leases  they  used  some  form  of  Gov- 
ernment lease,  United  States  Standard  Form  No.  2.  I  have  seen  many 
leases,  and  I  think  I  will  be  able  to  get  hold  of  some  of  them  for  you 
for  the  record  if  that  is  required,  where  this  paragraph  8,  which  I 
have  read  under  my  lease,  they  have  stricken  out.  They  have  deleted 
some  of  these  conditions  and  replaced  them  by  stating  that  wear  and 
tear  is  to  be  considered  barracks  use — "as  will  result  from  barracks 
use." 

It  says  on  the  back  of  this  lease  that  this  form  is  not  supposed  to  be 
used  on  any  rentals  exceeding  $2,000  a  year,  and  yet  they  are  writing 
a  $43,000  lease  on  it. 

The  Acting  Chairman.  You  lease  the  hotel  furnished,  do  you  not  ? 

Mr.  Weil.  Yes,  sir. 

The  Acting  Chairman.  You  had  a  regular  standard  lease  there, 
and  it  included  ordinary  wear  and  tear  ? 

Mr.  Weil.  Ordinary  wear  and  tear  excepted. 


8758     INVESTIGATION    OF   THE   NATIONAL    DEFENSE    PROGRAM 

The  Acting  Chairman.  He  had  the  upkeep  to  pay  in  addition  to 
his  rental ;  is  that  right  ? 

Mr.  Weil.  That's  right;  to  keep  the  building  up  in  good  repair; 
furnishings  as  well.  And  in  connection  with  this  question  of  wear  and 
tear  and  rehabilitation,  I  wish  to  present  to  you  a  newspaper  clipping 
of  Saturday,  May  8,  1943,  taken  from  the  Miami  Beach  Tropics,  under 
a  heading  "Hotel's  Furniture  in  Better  Shape  Than  Ever.  Army 
Keeps  All  Furnishings  in  Repair,"  and  so  forth.  And  in  this  article, 
which  I  shall  present  to  you  in  a  moment,  they  go  on  to  say  that  some 
of  this  wear  and  tear  is  caused  by  our  tropical  climatic  conditions. 
In  other  words,  at  that  time — this  was  prior  to  the  time  we  made  any 
attempt  to  get  a  hearing,  the  Army  and  Civilian  negotiators  were 
pursuing  and  getting  ready  already  for  the  same  type  of  tactics  which 
were  employed  in  getting  the  leases  in  relinquishing  the  properties. 
They  claim  in  here 

Senator  Ferguson  (interposing) .  You  charge  the  Army  now  with 
deliberately  going  out  to  cancel  the  leases  and  defraud  the  hotel  owners 
by  that  statement ;  is  that  true  ? 

Mr.  Weil.  I  am  not  claiming  that,  Senator.  I  am  claiming  that 
they  were  planning  at  that  time — and  this  article  will  prove  it  if  you 
will  read  it — to  get  ready  to  follow  the  same  type  of  methods  in  the 
settlements  for  rehabilitation  to  come  as  they  were  following  and 
adhering  to  when  they  made  the  leases. 

When  you  speak  of  the  Army,  Senator,  I  wish  to  make  one  thing 
clear,  that  there  isn't  a  single  hotel  owner  at  Miami  Beach  who  has 
ever  believed  other  than  this :  That  as  far  as  the  War  Department  and 
its  officers  are  concerned  in  Washington,  D.  C.,  or  any  other  Govern- 
ment official  in  Washington,  D.  C,  those  men  up  there  had  nothing 
to  do  with  this  situation. 

Senator  Ferguson.  We  always  hold  the  superior  responsible. 

Mr.  Weil.  We  are  complaining  to  the  superior.  We  are  placing 
the  responsibility  on  the  men  who  committed  these  acts. 

Senator  Ferguson.  But  you  think  the  War  Department  is  respon- 
sible? 

Mr.  Weil.  Yes,  but  I  did  not  say,  and  I  want  to  make  clear  that  as 
far  as  we  are  concerned  down  here,  we  have  always  felt  that  if  the  of- 
ficers in  Washington,  the  superior  officers  to  these  men  here,  had  known, 
if  they  had  been  present,  if  it  would  have  been  possible  for  them  just 
from  behind  the  curtains  to  watch  some  of  these  negotiations  and 
things  being  said,  and  so  forth,  and  the  way  it  was  done,  they  would 
not  have  given  their  approval,  we  feel  sure  of  that,  so  that  when  you 
say  I  am  accusing  the  Army 

Senator  Ferguson  (interposing) .  I  am  asking  you  if  you  are. 

Mr.  Weil.  I  am  not  accusing  the  Army,  Senator. 

Senator  Ferguson.  We  have  to  find  out  what  your  claims  are. 

Mr.  Weil.  We  claim,  not  only  by  this  newspaper  article,  of  course,, 
because  we  have  investigated  further  than  that,  that  these  fellows  over 
here  were  getting  ready,  in  the  engineers  department  and  the  real  es- 
tate department  and  the  real  estate  project  department,  to  let  us  have 
it  again  when  the  time  comes  when  they  move  out. 

The  Acting  Chairman.  You  believe  that  article  was  conspired  by 
them  ? 

Mr.  Weil.  To  show  and  get  the  people  ready  to  believe  that  the 
Miami  Beach  hotels  and  the  furniture  were  in  better  shape  than  ever. 


INVESTIGATION   OF    THE    NATIONAL    DEFENSE    PROGRAM     8759 

Now  they  give  you  figures  in  there  where  they  say,  for  instance,  that 
they  have  a  very  limited  number  of  men,  repair  men  (the  Army  has), 
in  their  repair  department,  and  they  were  taking  care  of  all  these  hotel 
rooms,  and  also  3,500  trucks  in  Miami  Beach.  I  think  they  have  a  total 
of  85  men,  Senator,  and  can  you  possibly  imagine  that  if  these  men 
worked  continually  and  without  sleeping  for  24  hours  a  day  for  the 
duration  of  this  war,  that  they  could  possibly  keep  240  hotels  and  all 
the  furniture  in  them  in  good  repair  and  condition,  and  also  take  care 
of  all  the  canvas  coverings  of  all  these  trucks  of  which  they  have 
hundreds  down  there,  and  keep  them  in  better  shape  than  they  ever 
were  before?  I  can't.  That  is  a  physical  impossibility,  and  they 
give  these  figures  here. 

Incidentally,  Senator,  if  I  may  call  your  attention  to  this  question 
of  anticipated  wear  and  tear  on  the  part  of  the  Government  itself,  I 
should  like  to  refer  to  House  Report  No.  132,  House  Resolution  No. 
130,  interim  report  made  by  the  Committee  on  Military  Affairs  of  the 
House  of  Representatives,  dated  February  17,  1943.  On  page  8,  this 
committee  reports  on  the  Greenbrier  Hotel,  at  White  Sulphur  Springs, 
W.  Va.,  and  the  Stevens  Hotel  in  Chicago,  111.  It  is  here  stated,  as 
you  perhaps  know  that  the  Greenbrier  and  also  the  other  hotel  were 
condemned  and  were  purchased  by  the  Government. 

The  Greenbrier  Hotel  has  700  rooms.  A  petition  in  condemnation  was  filed  in 
1942  in  order  to  obtain  immediate  possession.  Subsequently,  negotiations  were 
culminated  and  an  an  agreed  purchase  price  of  $3,300,000  was  paid.  The  War 
Department  appraisal  by  independent  experts  indicated  that  the  property  had 
a  fair  market  value  of  $3,500,000.  The  hotel  company  has  expended  more  than 
$6,000,000  on  the  property  since  1934,  and  it  was  given  a  book  value  of  $6,251,907. 
The  estimated  reproduction  cost  amounts  to  $6,984,101. 

Now,  here  is  what  I  am  referring  to,  and  this  is  what  the  Military 
Affairs  Committee  says : 

It  was  considered  advisable  to  purchase  this  establishment  rather  than  to 
lease  it  because,  as  hereto  before  observed,  the  War  Department  intends  to  make 
it  a  permanent  installation,  and  for  the  additional  reason  that  the  cost  of  con- 
verting a  hotel  to  a  hospital  is  relatively  great,  owing  to  expensive  special  equip- 
ment which  must  be  installed.  Moreover,  restoration  of  such  a  facility  upon 
the  termination  of  its  use  as  a  hospital  under  long-term  lease  would  be  excessive. 

Further  it  says : 

In  addition  to  excessive  restoration  costs  which  would  be  involved  in  any  rental 
of  the  property,  the  owners  of  the  hotel  would  undoubtedly  ask  the  court  to  include 
in  the  rental  price  compensation  for  the  loss  of  patronage  and  good  will,  which 
would  be  almost,  if  not  entirely,  lost  by  the  end  of  the  Army  occupancy. 

Now,  that  is  what  the  Military  Affairs  Committee  speaks  of.  They 
say  that  there  is  a  considerable  loss  of  good  will,  and  so  forth. 

We  hotel  owners  in  Miami  Beach,  while  we  have  always  realized 
that  there  will  be  a  considerable  loss  of  good  will  in  our  business, 
never  had  any  thought  in  our  minds,  nor  do  we  now,  to  have  that 
taken  into  consideration  at  all.  We  are  merely  asking  for  a  fair 
rental. 

If  you  will  permit  me,  I  should  like  to  sum  this  up  with  recommen- 
dations that  are  the  answers  to  the  conclusions  first  given  [reading]  : 

That  it  is  hoped  that  the  Government  will  correct  these  errors  and  inequities 
which  have  happened  because  of  the  haste  and  the  hurry  and  the  emergency 
of  the  time  existing,  and  make  provisions  to  avoid  such  mistakes  in  the  future, 
specifically  as  follows :  That  the  proper  governmental  authorities  make  the 
necessary  provision  to  give  any  hotel  owner  who  desires  to,  the  right  to  apply 
for  a  renegotiation  of  his  lease  to  a  fairer  basis. 


8760     INVESTIGATION   OF   THE   NATIONAL   DEFENSE    PROGRAM 

They  are  not  all  in  that  position.  There  are  many  of  them  who  are 
perfectly  satisfied.  We  don't  say  all  of  them  were  treated  that  way, 
but  many  were.     [Continuing  to  read  from  H.  Hept.  No.  132]  ; 

Second,  that  the  Government  will  cause  the  proper  authorities  to  arrange  for 
the  return  of  any  hotel  to  the  owner  in  the  same  condition  as  it  was  when  taken 
over  by  the  Army,  only  reasonable  wear  and  tear  excepted,  and  that  a  fair 
method  be  established  for  the  payment  of  such  damages  over  and  above  the 
ordinary  wear  and  teor  as  a  result  of  this  Army  occupation;  and  that  such 
settlements  shall  be  made  as  quickly  as,  for  instance,  an  insurance  company 
would  settle  a  hurricane  loss. 

Third,'  that,  if  possible,  the  proper  Government  authorities  issue  a  statement 
through  our  local  newspapers  so  that  the  false  and  erroneous  impressions 
created  in  the  minds  of  the  public  of  Dade  County  caused  by  these  newspaper 
stories  and  presented  here,  and  the  radio  broadcasts  referred  to,  shall  be  cor- 
rected. 

Ladies  and  gentlemen,  in  connection  with  this  particular  request  I 
want  to  say  that  there  are  thousands  and  tens  of  thousands  of  Dade 
County  residents  who  still  believe  these  stories  and  still  point  their 
fingers  at  many  of  us  over  here,  even  to  this  day. 

Fourth,  that  the  Government  cause  the  proper  authorities  to  make  the  neces- 
sary arrangement  for  proper  and  equitable  timing  in  the  payment  of  rentals  in 
the  return  of  any  hotel  which  will  be  returned  after  January  15  or  before  October 
1  of  any  year. 

Senator  Ferguson.  Mr.  Weil,  I  am  going  to  read  to  you  a  part  of 
the  Miami  Daily  News,  March  23,  1942  (it's  a  quote  from  you)  and 
ask  you  for  comment: 

Climax  of  the  meeting  came  when  Bruno  Weil,  owner  of  the  Belmar  Hotel, 
charged  hotels  failed  to  live  up  to  their  original  agreements  on  leasing  the  prop- 
erties. He  said  they  have  adopted  this  attitude  with  the  hope  that  Government 
money  may  pay  off  their  incumbencies.  The  three  mentioned  were  charged 
with  being  among  the  five  or  six  involved. 

"They  are  individuals  who  in  the  next  6  months  will  drown  anyway,"  Weil  said 
'"They  hoped  Government  money  would  save  them." 

That's  the  end  of  your  quote. 

At  the  conclusion  of  Weil's  statement  all  persons  present  in  the  hall  declared 
that  the  attitude  of  the  offending  hotels  does  not  represent  the  sentiment  and 
the  willingness  to  cooperate  on  the  part  of  some  300  other  Miami  Beach  hotels. 

(The  newspaper  article  referred  to  was  marked  "Exhibit  No.  962" 
and  is  included  in  the  appendix  on  p.  9022.) 

Senator  Ferguson.  You  used  that  statement,  "They  hoped  Govern- 
ment money  would  save  them,"  and  that  they  would  have  drowned  in 
the  nex+  6  months. 

Mr.  Weil.  Senator,  the  quotation,  the  entire  quotation,  is  a  mis- 
statement. I  distinctly  remember  what  I  said.  After  Bryan  Hanks, 
who  acted  as  the  chairman  of  this  meeting,  got  through  with  his  open- 
ing speech,  where  he  accused,  following  up  the  newspapers,  the 
fellows  south  of  Twentieth  Street,  after  making  it  clear  that  cer- 
tain interests  north  of  Twentieth  had  given  no  trouble,  the  moment 
the  man  had  closed  his  mouth,  I  was  on  my  feet,  and  I  said  that  if — 
that  if — there  were  any  such  hotels  at  Miami  Beach,  such  few  as  the 
newspaper  claims  there  are,  that  that  does  not  represent  the  senti- 
ment of  325  of  them,  but  that  the  other  320,  I  am  sure,  are  ready  to 
cooperate.  And  I  did  not  make  any  reference  to  any  particular 
hotel  drowning,  but  I  did  say  this  to  Lieutenant  Talley  at  the  very 
first  meeting  when  Lieutenant  Talley  was  here — and  there  was  a  whole 
group  of  us  sitting  in  a  circle  after  Lieutenant  Talley  got  through 


INVESTIGATION   OF   THE    NATIONAL    DEFENSE    PROGRAM     8761 

when  each  one  of  us  was  asked  questions  as  to  what  we  thought— I 
said: 

Lieutenant,  don't  you  believe  that  the  best  and  quickest  method  in  order  to 
avoid  trouble  would  be  for  a  committee  to  be  appointed  so  that  we  may  get 
up  a  complete  list  of  hotels,  all  of  the  details,  because  I  can  tell  you  that  there 
are  several  hotels  in  Miami  Beach  which  are  so  badly  overflnanced — and  that 
is  the  fact,  one,  two,  three,  and  four  mortgages  and  some,  in  addition  to  the 
mortgages,  their  furniture  being  mortgaged. 

I  said : 

You  will  run  into  situations  where  owners  will  be  unable  to  deal  with  you  for 
that  very  reason,  and  I  am  afraid  that  complications  and  harsh  words  will 
exchange,  and  in  order  to  avoid  that,  I  suggest  this  committee  be  appointed. 

Lieutenant  Talley  said: 

That  is  a  very  good  idea,  but,  Mr.  Weil,  we  don't  have  sufficient  time.  We  have 
got  to  work  fast. 

Now,  the  man  knew  what  he  was  talking  about,  because  on  February 
18,  just  a  few  days  after  this  meeting,  the  Army  Air  Corps  moved  its 
first  officer  candidates  in.  Coming  back  to  this  other  meeting  on 
March  23 — when  I  got  up  on  my  feet  and  stated  that  "if" — I  didn't 
say  there  was,  because  I  didn't  know ;  frankly  I  didn't  believe  it,  but 
after  all,  we  are  all  humans  and  for  all  I  know  there  might  have  been 
some  men  who  did  the  things  the  newspaper  claimed  they  did,  but  we 
could  never  find  one  of  them. 

The  newspapers  claimed  they  published  the  stories  by  someone  that 
phoned  in,  and  while  they  should  have  checked  them,  in  their  excite- 
ment they  didn't  check  them  either.     I  did  say  that  if 

Senator  Ferguson  (interposing).  When  did  you  get  that  informa- 
tion? 

Mr.  Weil.  What  information? 

Senator  Ferguson.  About  the  newspapers  having  quoted  someone. 

Mr.  Weil.  That  information  was  finally  compiled  sometime  during 
April  or  May  of  this  year. 

Senator  Ferguson.  Whom  did  you  talk  with  on  the  newspapers 
about  that? 

Mr.  Weil.  I,  personally,  didn't  talk  with  anyone  on  the  newspapers, 
but  one  of  the  members  on  the  committee. 

Senator  Ferguson.  Your  statement  here  is  hearsay,  then. 

Mr.  Weil.  It  was  not  hearsay,  because  I  was  present  at  the  time  these 
conversations  happened  with  the  newspapers. 

Senator  Ferguson.  It  was  made  in  your  presence  ? 

Mr.  Weil.  I  was  on  the  extension  telephone. 

Senator  Ferguson.  From  whom  at  the  newspaper  did  you  get  this 
information  ? 

Mr.  Weil.  Down  at  the  Miami  Herald,  information  was  given  by 
Mr.  Pennekamp.  The  other  newspapers  wouldn't  commit  themselves, 
except  the  Daily  Tropics.  Mr.  John  Montgomery  stated  that  fact 
to  me. 

Senator  Ferguson.  No  one  told  you  who  the  man  was  that  tele- 
phoned ? 

Mr.  Weil.  They  would  not  commit  themselves. 

Senator  Ferguson.  Did  they  say  they  know  who  it  was? 

Mr.  Weil.  The  Miami  Herald  said  to  one  of  the  members  of  this 
committee,  Mr.  N.  B.  T.  Roney,  yes,  they  could  trace  the  original  of  that 
telephone  call,  but  before  they  could  disclose  this  gentleman's  name, 

311932 — 44 — pt.  21 17 


8762     INVESTIGATION    OF   THE    NATIONAL   DEFENSE   PROGRAM 

they  would  have  to  get  in  touch  with  him  and  get  his  permission  first, 
and  inasmuch  as  he  was  out  of  the  city,  they  would  telegraph  him. 
According  to  their  statement,  they  did  telegraph  him  and  received  the 
reply  that  this  gentleman  was  unwilling  to  have  his  name  disclosed  in 
connection  with  this  matter. 

Senator  Ferguson.  You  haven't  any  personal  knowledge  as  to  who 
L\e  gentleman  was  who  gave  the  information? 

Mr.  Weil.  I  have  no  personal  knowledge,  but  I  have  a  halfway  good 
idea,  but  no  knowledge. 

Senator  Ferguson.  That  is  all. 

The  Acting  Chairman.  Might  I  suggest  that  there  is  a  typewritten 
copy  of  the  conversation  with  Mr.  Talley  and  the  hotel  group,  of  these 
two  sessions  here  with  the  preliminary  hotel  group,  and  the  Army  has 
that  stenographic  copy  in  its  possession. 

Senator  Ferguson.  That  should  give  Mr.  Weil's  quotation. 

Mr.  Ward.  I  believe,  if  you  request  the  Army  to  give  you  that,  that 
was  taken  down  in  stenographic  note  form. 

Senator  Ferguson.  That  is  all,  Mr.  Weil.     Thank  you. 

The  Acting  Chairman.  Is  Mr.  Duff  here? 

In  the  interests  of  getting  the  hearings  completed,  we  will  have  a 
night  session  here  tonight,  beginning  at  7 :  30,  in  the  same  room.  When 
we  adjourn  this  afternoon,  we  will  adjourn  until  tonight. 

Do  you  solemnly  swear  the  evidence  you  give  in  the  matter  now  in 
hearing  shall  be  the  truth,  the  whole  truth,  and  nothing  but  the  truth, 
so  help  you  God  ? 

Mr.  Duff.  I  do. 

Mr.  Stone.  I  do. 

The  Acting  Chairman.  Will  you  give  your  full  names,  occupations, 
and  addresses  to  the  reporter  for  the  benefit  of  the  record  ? 

TESTIMONY  OP  JOHN  M.  DUFF,  JR.,  AND  ALFRED  STONE 

Mr.  Duff.  John  M.  Duff,  Jr. 

Mr.  Stone.  Alfred  Stone. 

The  Acting  Chairman.  Address? 

Mr.  Duff.  My  business  address  is  Green  Heron  Hotel,  North  Miami 
Beach. 

The  Acting  Chairman.  What  is  your  business  in  the  hotel  ? 

Mr.  Duff.  I  am  the  lessee  and  operator  of  the  hotel. 

The  Acting  Chairman.  You  are  the  lessee  and  operator.  And  Mr. 
Stone? 

Mr.  Stone.  I  am  president  of  the  800  Washington  Avenue  Co., 
which  operates  the  Blackstone  Hotel. 

(The  document  referred  to  was  marked  "Exhibit  No.  963"  and  is 
included  in  the  appendix  on  p.  9024.) 

The  Acting  Chairman.  I  see. 

Mr.  Halley.  Mr.  Duff,  were  you  president  of  the  so-called  Citizens 
Committee  appointed  in  connection  with  this  Army  acquisition  pro- 
gram ? 

Mr.  Duff.  I  was  president  of  the  Miami  Beach  Hotel  Association  at 
the  time,  and  when  the  Army  came  in,  I  was  asked  to  serve  as  chairman 
of  the  Army  Coordinating  Committee. 

(The  documents  referred  to  were  marked  "Exhibits  Nos.  964  and 
965"  and  are  included  in  the  appendix  on  pp.  9024  and  9025.) 


INVESTIGATION   OF    THE    NATIONAL   DEFENSE   PROGRAM     8763 

Mr.  Halley.  Who  asked  you  to  serve? 

Mr.  Duff.  As  president  of  the  Hotel  Association,  and  serving  as  a 
director  on  the  Miami  Beach  Chamber  of  Commerce,  at  a  meeting 
held  at  the  Cromwell  Hotel  as  a  result  of  some  differences  between  the 
Army  and  the  hotel  owners  making  their  leases,  I  was  asked  by — well, 
just  by  a  lot  of  the  people  that  were  there  that  day. 

Mr.  Halley.  Were  they  hotel  owners? 

Mr.  Duff.  They  were  all  hotel  owners,  somewhere  between  two  and 
three  hundred  of  them. 

Mr.  Halley.  Did  you  appoint  your  committee,  or  were  they  selected 
by  the  hotel  owners? 

Mr.  Duff.  I  appointed  them  with  a  group  of  directors  of  the  cham- 
ber of  commerce  and  the  hotel  association. 

Mr.  Halley.  And  is  Mr.  Stone  one  of  the  members  of  that  commit- 
tee you  appointed? 

Mr.  Duff.  Mr.  Stone  was  one  of  our  committee  that  I  selected. 

Mr.  Halley.  Could  you  place  the  date  of  this  meeting  at  the  Crom- 
well Hotel? 

Mr.  DufF.  No. 

Mr.  Halley.  Approximately?  Was  it  in  the  month  of  March  or 
April  1942? 

Mr.  Duff.  Well,  it  was 

Mr.  Halley.  Can  you  help,  Mr.  Stone? 

Mr.  Stone.  I  would  say  it  was  in  the  latter  part  of  March  of  that 
year. 

ARMY  NEGOTIATIONS  FOE  LEASING  MIAMI  HOTELS 

Mr.  Halley.  And  did  the  committee  then  begin  to  function  ? 

Mr.  Duff.  It  began  immediately ;  yes,  sir. 

Mr.  Halley.  What  were  your  purposes  as  authorized  by  the  hotel 
owners  ? 

Mr.  Duff.  Well,  when  Lieutenant  Talley  first  arrived  and  started 
making  leases,  he  made  just  a  few. 

Senator  Ferguson.  Did  he  come  before  Fitch? 

Mr.  Duff.  Yes,  sir;  he  did.  Lieutenant  Talley  was  the  first  officer 
to  arrive  here  from  Washington  to  begin  negotiations,  and  he  had 
made  just  a  few  leases  when  he  came  to  me  one  Saturday  afternoon, 
and  he  said,  "I  am  just  stuck.  I  am  going  to  ask  Washington  for  con- 
demnation authority."  He  said,  "I  can't  make  deals  with  a  good 
many  of  these  property  owners,  and  I  am  just  stuck." 

Well,  of  course,  I  don't  know  what  developed  between  him  and 
Washington,  but  a  day  or  two  later,  when  General  Wooten  arrived, 
he  called  off  negotiations  and  then  it  came  out  in  the  papers  that  there 
were  five  or  six  hotel  owners  that  couldn't  be  dealt  with. 

Mr.  Halley.  Do  you  know  who  those  people  were? 

Mr.  Duff.  No.  I  knew  there  were  some  that,  due  to  financial  rea- 
sons, couldn't  make  a  deal. 

Senator  Ferguson.  Were  there  five  of  six  ? 

Mr.  Duff.  I  don't  believe  there  could  be. 

Senator  Ferguson.  How  many  were  there? 

Mr.  Duff.  I'd  say  three  or  four. 

Senator  Ferguson.  That  couldn't  make  deals,  you  felt,  because  their 
properties  were  so  involved  ? 


8764     INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM 

Mr.  Duff.  Two  of  them  were  so  involved  it  made  it  very  hard  for 
them  to  make  a  deal  and  much  harder  for  the  Army  officers  to  deal 
with  them,  knowing  that  they  were  in  that  condition. 

Senator  Ferguson.  Is  it  true  there  was  some  overfinancing? 

Mr.  Duff.  Yes,  sir ;  I  am  afraid  there  was ;  that  is,  in  the  opinion 
of  some  people. 

Senator  Ferguson.  And  that  is  why  you  felt  there  were  a  few  that 
couldn't  make  deals,  because  they  were  overfinanced  ? 

Mr.  Duff.  Yes,  sir.  There  was  one  definite  one  that  I  know  of  that 
was  not  in  any  financial  difficulty,  but  he  just  deliberately  refused 
to  deal. 

Senator  Ferguson.  How  many  rooms  did  he  have? 

Mr.  Duff.  One  hundred  thirty  or  forty. 

Senator  Ferguson.  He  did  refuse  absolutely  to  deal  ? 

Mr.  Duff.  The  first  night  that  Colonel  Stoll  arrived,  when  I  took 
him — that  was  the  commanding  office  of  the  officer  candidate  school ; 
that  was  the  only  one  they  had  planned  on  bringing  to  Miami  Beach 
(that  was  the  story  of  the  officer  candidate  school) — when  I  took  Col- 
onel Stoll  and  the  staff,  the  day  they  arrived,  around  to  the  different 
properties  to  show  them  what  was  available,  we  went  to  this  one 
hotel  at  night,  and  the  owner  of  the  hotel  and  the  operator,  although 
he  had  leased  it  and  was  present  there,  said  Uncle  Sam  could  have  his 
property  for  one  dollar,  and  he  showed  us  all  through  the  place,  and 
when  we  left,  Colonel  Stoll — and  Bryan  Hanks  was  there — said,  "Well, 
that  certainly  shows  a  very  patriotic  spirit." 

So  the  next  day  they  went  directly  there  to  make  the  deal,  and  his 
first  words  were  that  the  furniture  had  cost  them  $85,000,  and  that  if 
the  Army  paid  them  $85,000,  he  would  talk  negotiations  on  the  hotel. 

Senator  Ferguson.  Overnight  he  changed  his  mind  ? 

Mr.  Duff.  That's  right.  That  is  one  very  definite  one  that  I  know 
the  Army  couldn't  deal  with.  The  others,  I  don't  believe  there  was 
any  intentional 

Senator  Ferguson  (interposing).  But  it  was  overfinancing  that 
prevented  them  ? 

Mr.  Duff.  It  brought  it  to  the  point  they  didn't  know  how  to  make 
a  deal  for  the  money  they  knew  the  Army  was  offering.  Their  carry- 
ing charges  were  more  than  the  rent  would  bring  them,  and  I  do  not 
believe  it  was  the  intent  of  these  men  to  hold  up  the  Army  making  a 
deal.  They  just  couldn't  do  it,  because  they  had  to  pay  more  for 
their  carrying  charges  than  the  Army  would  pay. 

Mr.  Halley.  Would  you  say  these  were  three  or  four  men? 

Mr.  Duff.  I  would  say  three  or  four  properties ;  I  don't  believe  five 
or  six. 

Mr.  Halley.  At  that  time  did  the  Army  have  any  hotel  properties? 

Mr.  Duff.  Yes ;  they  did,  Mr.  Halley,  they  had  three  or  four.  You 
see,  the  first  men  that  came — there  were  only  500  in  number. 

Mr.  Halley.  There  were  several  hundred  left,  is  that  right? 

Mr.  Duff.  There  were  close  to  300.  There  were  three  hundred  and 
some  left. 

Mr.  Halley.  Were  the  few  with  whom  it  would  have  been  difficult 
to  deal  essential,  or  were  there  other  hotels  available? 

Mr.  Duff.  After  the  first  500  men  came  for  the  first  class,  when 
they  get  enough  hotels  for  those  500,  there  was  a  lapse  in  the  leasing  of 


INVESTIGATION   OF   THE    NATIONAL   DEFENSE    PROGRAM     8765 

property,  and  when  they  resumed  the  attempt  to  lease  is  when  they 
ran  into  trouble. 

Mr.  Halley.  But  only  with  three  or  four  people  ? 
Mr.  Duff.  That  I  know  of. 
Mr.  Halley.  Weren't  other  hotels  available  ? 

Mr.  Duff.  Yes,  but  as  they  went  from  one  hotel  to  another,  in  one 
day  he  struck  thre  or  four  he  couldn't  deal  with. 
Senator  Ferguson.  He  hit  those  first  ? 
Mr.  Duff.  He  hit  those  first,  and  he  said  the  only  way  he  could  see 

he  could  deal  would  be  with  a 

Senator  Ferguson  (interposing).  An  association? 
Mr.  Duff.  No,  no,  was  to  get  permission  from  Washington  to  con- 
demn, and  Washington,  it  came  out  afterwards,  would  not  give  that 
permission.     They  wanted  to  make  satisfactory  deals  with  all  con- 
cerned. 

Senator  Ferguson.  So,  then,  we  find  there  is  a  foundation  for  the 
news  items.     You  say  three  or  four ;  the  paper  says  five  or  six. 
Mr.  Duff.  That's  right. 

Senator  Ferguson.  If  that  continued,  that  attitude  continued,  and 
he  couldn't  make  them,  Washington  wouldn't  give  condemnation  au- 
thority  

Mr.  Duff  (interposing).  That's  right. 

Senator  Ferguson.  Therefore  the  Army  would  not  come  to  Miami 
Beach. 
Mr.  Duff.  That's  right. 

Senator  Ferguson.  So  there  is  foundation  for  these  articles. 
Mr.  Duff.  General  Wooten  came  and  stopped  all  negotiations. 
The  day  General  Wooten  arrived,  he  stopped  negotiations. 

Senator  Ferguson.  I  say,  then,  there  is  a  foundation  for  these 
articles. 
Mr.  Duff.  Oh,  yes. 

Mr.  Ferguson.  And  the  most  that  can  be  said  is  that  it  was  five 
or  six,  whereas  he  found  three  or  four  in  the  first  day. 
Mr.  Duff.  I  believe  that  is  about  right. 

The  Acting  Chairman.  And  there  was  only  one  of  those  that  was 
deliberate  refusal. 

Mr.  Duff.  Only  one  I  know  of  was  a  deliberate  refusal. 
The  Acting  Chairman.  The  other  was  an  impossible  financing 
position  ? 

Mr.  Duff.  That's  right.  I  believe  that  is  the  reason  the  deal  wasn't 
made. 

Senator  Ferguson.  How  many  would  you  say  he  approached  up 
to  that  time?  He  got  three  or  four  that  couldn't  negotiate  because 
of  finances,  and  the  other  was  deliberate.  How  many  had  he 
approached  ? 

Mr.  Duff.  I  don't  believe  I  know  that.     I  wasn't  with  him. 
Senator  Ferguson.  Have  you  any  idea  ? 

Mr.  Duff.  I  think  after  three  or  four  he  got  pretty  well  discouraged 
that  it  was  going  to  be  a  tough  proposition  to  make  these  leases. 
Senator  Ferguson.  This  came  early  in  his  negotiations? 
Mr.  Duff.  Yes,  sir;  it  did.     It  came  so  early  that  General  Wooten 
had  not  arrived  here  yet. 


8766     INVESTIGATION   OF   THE    NATIONAL    DEFENSE   PROGRAM 

Senator  Ferguson.  Do  you  know  how  the  newspapers  and  the  radio 
got  those  facts  ?     Were  they  well  known  ? 

Mr.  Duff.  I  don't  know  how  they  got  them. 

Senator  Ferguson.  I  mean  it  was  a  well-known  fact.     You  knew  it. 

Mr.  Duff.  Yes. 

Senator  Ferguson.  How  many  other  people,  to  your  knowledge, 
knew  it?     Did  Mr.  Stone  know  it? 

Mr.  Stone.  Senator,  at  first  hand  I  did  not  know  of  any  of  these 
negotiations  that  had  failed.  The  first  I  knew  that  there  was  trouble 
and  chaos  was  the  newspaper  articles,  and  the  newspaper  articles 
seemed  to  be,  at  the  time,  extreme.1  They  seemed  to  condemn  all  the 
hotel  people  of  Miami  Beach,  and  that  is  what  caused  this  great 
excitement.  There  was  a  complete  break-down  of  these  negotiations, 
as  General  Wooten  at  that  time  says  there  was.  And  we  felt,  the 
other  hotel  men  at  the  meeting,  that  the  hotel  men  of  Miami  Beach 
are  as  patriotic  as  any  in  the  country,  and  we  didn't  want  that  im- 
pression, that  interpretation,  to  go  on. 

Senator  Ferguson.  You  knew,  then,  the  fact  that  General  Wooten 
had  decided  he  couldn't  go  any  further,  and  you  got  a  group  to  deal 
with  him  and  try  to  straighten  it  out ;  is  that  right? 

Mr.  Stone.  That's  right. 

Senator  Ferguson.  You  may  proceed. 

Mr.  Duff.  When  this  difficulty  came  up,  there  was  a  meeting  called 
at  the  Cromwell  Hotel,  and  all  property  owners  were  notified,  or,  at 
least,  we  believe  all  of  them — there  were  somewhere  between  two  and 
three  hundred  hotel  owners  at  that  meeting — and  Bryan  Hanks  did 
the  opening  talk  and  told  what  had  happened  and  that  it  was  nec- 
essary for  us  to  either  get  together  with  the  Army  officials  and  make 
these  leases  or  the  Army  would  be  withdrawn  from  Miami  Beach 
entirely,  and  that  if  they  did  that,  it  would  just  be  a  disgrace  to  Miami 
Beach,  that  we  turned  the  Army  away,  and  it  was  then  that  I  was 
nominated  to  act  as  a  chairman  to  select  a  committee  in  order  to  get 
the  Army  and  the  hotel  owners  together  and  make  leases. 

So  the  committee  was  formed,  and,  on  the  advice  of  the  directors  of 
the  chamber  of  commerce  and  the  directors  of  the  Hotel  Association, 
we  selected  men  that  were  capable  of  appraising  property.  We  picked 
men  that  that  was  their  business.  We  picked  Ed  Keefer,  who  has  a 
reputation  here  in  the  Beach  for  appraising  property  for  banks,  trust 
companies,  mortgage  companies,  and  his  figures  are  seldom  disputed. 
We  picked  August  Geiger,  who  is  the  city  architect,  and  his  opinion 
of  properties  is  not  to  be  disputed.  And  then  we  picked  men  in  the 
real-estate  business,  such  as  Baron  De  Hirsch  Meyer;  Peter  Miller; 
Charles  Clements,  president  of  the  Chase  Federal  Bank;  Frank 
Smathers,